Section 179 Expense Deduction and Depreciation

[indicolts123]

Hi,

I am planning for my end-of-year taxes and thinking about making a strategic car purchase under section 179.

My current situation:

1. W2 employed - 150k and already taxed 

2. Own LLC A - will make 1-2k profit this year pass through single-member 

3. Own LLC B - will make 20k profit this year pass through single-member 

4. I am also part of a partnership where I will receive a K-1 and profits of 50k-100k this year 

5. Stocks and crypto - maybe 20-40k profits 

What I would like to do:

I would like to purchase a Tesla X which is $75,000-80,000 used on a loan and ideally get tax benefit using section 179 and the fact that Tesla X is classified as a large vehicle. This would be used for LLC A mostly which only profits 1-2k this year. 

Question: 

Is it possible to use section 179 for this car purchase? If so, what is the best strategy and what does the math look like? 

Own stab at the question and scenario: 

My purchase price for the Tesla X is say $70,000 for 50% use in LLC A which is a single-member LLC pass-through entity that has profits of $1-2k this year. During the purchase, I will use a loan for $60,000 of the purchase value and $10,000 down.

I could then use section 179 to deduct $25,000 for vehicle purchases. Bonus depreciation brought into year 1 would be $60,000 (not sure how to get this number). The interest deduction is say $400. 

Then 25,000+60,000+400 = $85,400. Then $85,400 *35% personal tax rate = $29,890 deduction.

Does this $29,890 apply to all my other income like K1, LLC B, W2? 

[M-MTax]

There is a dollar limitation for Sec. 179 for vehicles.

• Cars ($18,200 deduction limit): For depreciation purposes, a car is any four-wheeled vehicle (including a truck or van) made primarily for use on public streets, roads, and highways. Its unloaded gross vehicle weight must not be more than 6,000 pounds.
• SUVs ($26,200 deduction limit): Any four-wheeled vehicle primarily designed or used to carry passengers over public streets, roads, or highways and that is rated at more than 6,000 pounds gross vehicle weight and not more than 14,000 pounds gross vehicle weight.

[Mike9241]

more limits on 179. if business use is 50% or less 179 is not allowed. if it's more than 50% it's allowed in the year of acquisition but if in any year during the recovery period it must be recaptured if business use drops to 50% or less. then cumulative depreciation computed using standards MACRS is allowed.  

not sure what you're saying here:

Bonus depreciation brought into year 1 would be $60,000 

[indicolts123]

@Mike9241 awesome, thanks for the quick reply! 

Can you comment as to if this deduction would apply to the LLC A only which only made $2k profit this year or could it also be applied to my K-1 or general stock gains?

For example, if I make $20k profit in stock gains, $10k k1 and $2k for the LLC A (the car is for this business) can I use the $26,000 limit toward the $20k stock profit OR the $10k K-1 income?

Thanks for your help 

[indicolts123]

Can you comment as to if this deduction would apply to the LLC A only which only made $2k profit this year or could it also be applied to my K-1 or general stock gains?

For example, if I make $20k profit in stock gains, $10k k1 and $2k for the LLC A (the car is for this business) can I use the $26,000 limit toward the $20k stock profit OR the $10k K-1 income?

If it only goes towards the $2k profit on the LLC A then there will be negative gains? 

[Mike9241]

179 is limited to business income but all business income net of business losses is taken into account. investment income (stocks, dividends, interest, royalties) is not business income.  wages are business income.

see IRS publication 946 for more information.

https://www.irs.gov/pub/irs-pdf/p946.pdf 

[indicolts123]

@Mike9241 so it sounds like I can offset some of my personal W2 wage income or no? 

Can I offset my k1 income? 

[M-MTax]

You can offset your W2 income and also k1 income BUT ONLY IF the k1 income is ordinary income like from self employment. You can't offset any k-1 income that is passive or portfolio income and the like.