Used vehicle purchased by my Subchapter S Corp July 2023 Did NOT take 179 Depreciation on 2023 1120S May I take it on 2024 1120S

[UnWrapYourHome]

Greetings,

My Subchapter S Corp purchased a used under 6,000 GVWR vehicle in July 2023. We traded a leased vehicle that was also leased under our S Corp for this newly purchased used vehicle. We did NOT take any 179 depreciation on the “new” used purchased vehicle on our 2023 1120S return. We do NOT use the standard milage deduction and use gas and repair expenses. My question is:

May we take 179 depreciation on our 2024 1120S return for this vehicle that was placed into service in July 2023??

We always took 90% of our lease payments as a legitimate business expense in the past, however I read where a Sub S Corp may NOT deduct the monthly vehicle payment amounts as a business expense on a purchase. Any help would be greatly appreciated!

[KrisD15]

No, Section 179 may only be claimed for the same year as when the asset was placed in service. 

If you took a loan on the vehicle, the vehicle would still be entered as an asset with the full cost as it's basis. So the basis would be the trade-in you got for the leased vehicle (if any) as well as any cash paid and the loan amount. The vehicle will be depreciated over five years unless you decide to claim Standard Mileage.

The interest on the loan payments would be an expenses for the business. Only the interest paid is claimed, not the principal. 

You could amend the 1120-S for 2023 and claim the Section 179 Deduction, but then the shareholders might also need to amend their personal 2023 returns. 

Section 179

[UnWrapYourHome]

Hi KrisD,

Thank you so much for your kind reply.

I understand 179 is usually excellerated depreciation and since I missed entering this new (used) vehicle as an asset on my 2023 1120S I cannot take 179 on my 2024 1120S.

Question for clarification:

Do I still list this vehicle as a Corporate assest on 2024 1120S and if so will I be able to capture any "regular" depreciation?

Sounds like I can deduct the interest paid during 2024 on this vehicle. If this vehicle is used 80% for business and 20% for personal I imagine I will only be able to claim 80% of the total interest paid during 2024.

I hope TurboTax Business Software will guide me where on 1120S I get to take that interest deduction.

I am unsure if that is in the business vehicle section or just Corporate interest paid on all loans on assests.

I really appreciate your help and insight.

Cheers! 

[PatriciaV]

Yes, the vehicle should remain a business asset as long as it is used at least 50% for business purposes. You will claim depreciation expense each year (TurboTax will calculate this for you).

In TurboTax Business for a Form 1120S return, interest expense is entered under Federal Taxes >> Deductions >> Common Business Expenses >> Interest Expense.

[AmeliesUncle]

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@UnWrapYourHome wrote:

If this vehicle is used 80% for business and 20% for personal I imagine I will only be able to claim 80% of the total interest paid during 2024.

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No, it is 100% business use.   A corporation does not have personal use.  If the employees/shareholders used it for personal use, that is taxable wages that must be included on their W-2.  Just be sure not to deduct that 'extra' amount on the W-2 on the 1120-S because it is already being deducted as a vehicle expense.