taking car credit year after deduction

[stech]

I bought BMX x5 2019 used ($39K). it used Gas and Electric and qualifies for electronic credit. I didn't take the credit in the past. Can I claim in my 2022 return personal or business LLC?

[NCperson]

what year did you purchase the automobile? that is the year that any credit needs to be used, assuming it's eligible. 

can you explain the comment "qualifies for electronic credit"?  what 'electronic credit"?  the EV credit? why do you beleive this vehicle is eligible for such credit? for used EVs, assuming they are eligible, the credit only began on purchases that occured beginning 1/1/23. 

[stech]

Its BMW X5, it qualify for EV credit.

https://www.billjacobsbmw.com/bmw-models-eligible-for-the-clean-vehicle-tax-credit/

Purchased in 2020

[stech]

if I can't qualify EV credit, can I deduct the cost as Sec 179 for business. I did use that car for business (LLC). 

[NCperson]

@stech - you state your vehicle was a 2019 model year and purchased in 2020 as a used vehicle.  Prior to 1/1/23 used vehicles were not eligible for the EV credit. Further, the link you provided does not include the 2019 model year vehicles.  

You can only take the credit in the year you put the car in service, which for you is 2020. 

you are not eligible for the credit. 

[Opus 17]

If you place a vehicle in service for business, you can either claim the standard mileage expense (which is calculated to include depreciation, maintenance, fuel and insurance); or you can claim actual expenses, which includes depreciation.  Your actual expenses must be prorated based on the percentage of total miles that were driven for business.  

You might qualify for section 179 depending on how you choose to expense the vehicle and the percentage of business use.  You must choose how to report your business use on the first year you begin using the vehicle in business.  Was that also 2020, or did you only start using the vehicle for business more recently?

[stech]

I want to use sec 179, it would be higher

I started my business in 2022. Car was used partially (20%) business and 80% personal. Can I expense $7800 ($39K * 20%) cost of car as sec 179?

[Opus 17]

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@stech wrote:

I want to use sec 179, it would be higher

I started my business in 2022. Car was used partially (20%) business and 80% personal. Can I expense $7800 ($39K * 20%) cost of car as sec 179?

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No.  You can only use section 179 if the property is used at least 50% for business.

When you place used property in service in a business, your basis for depreciation is either the purchase price, or the present fair market value, whichever is lower. 

Publication 463 discusses business use of a personal vehicle.

https://www.irs.gov/forms-pubs/about-publication-463

If you use the standard mileage rate, you deduct about 65.5 cents per mile of business travel. This includes built-in allowances for fuel, repairs, maintenance, insurance and depreciation.  You need a mileage diary or log that shows the date, business purpose, and mileage of each business trip.

If you want to use the actual expense method, you must track all your vehicle expenses for the year -- fuel, maintenance, repairs, depreciation, and insurance.  You can deduct the cost of electricity if you can prove it (that might be tricky).  You must add up the total costs for the year.  You must also have a mileage log or diary at shows the date, business purpose, and mileage of each business trip AND you must keep track of the total vehicle miles driven.  At the end of the year, you figure the percentage of business miles, and deduct that percentage of expenses.  If you use the actual expense method, one of your expenses would be regular 5 year depreciation, based on the fair market value of the car as a used car when you placed it in service in 2022.

Because of the difficult record keeping requirements, and the possible difficulty of getting accurate electricity costs that would stand up to audit, you might consider using the standard mileage method.  Also note that, if you use the exact expense method, you use up the depreciation deduction after 5 years.  With the standard mileage method, it always contains a depreciation component, which means if you keep the car for 10 years, you get 10 years of depreciation instead of 5.