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tyreka-burtonpd3
New Member

I earned $16,000 for my self employment business; however, i used $4,000 as a down payment for a vehicle that i use more for business then pleasure. Can i write off 4000

Should I still be paying tax of the $16,000 i earned.  Can $4000 that was re invested back into the business be a write off
2 Replies
Mike9241
Level 15

I earned $16,000 for my self employment business; however, i used $4,000 as a down payment for a vehicle that i use more for business then pleasure. Can i write off 4000

if you purchased the vehicle and it was put into service in the same year as the $16K was earned, then your deduction for the vehicle is not the $4K but can be up to the full cost of the vehicle times the % of business use which is determined by business miles to total miles driven during the year. Turbotax can figure the deduction when you go through the questions about the vehicle. 

 

on the other hand, if you are leasing the vehicle then the deduction would be the lease payments times business use. you may need to make an adjustment to the deductible lease payments  - referred to as lease inclusion.

see iRS pub 463 starting on page 22

Opus 17
Level 15

I earned $16,000 for my self employment business; however, i used $4,000 as a down payment for a vehicle that i use more for business then pleasure. Can i write off 4000

No, you can’t “write off” the $4000.  Not as you stated.  

What you do is enter the vehicle as a business asset, using the purchase price or fair market value, whichever is less.  If the vehicle is not used 100% for business, you must enter a business use percentage, and if audited later, you must have mileage records to back up the business percentage.  

Once your vehicle is listed as an asset, you will claim depreciation (wear and tear) as a business expense.  There are 3 depreciation methods allowed, TurboTax will tell you what you qualify for.   For example, if the total vehicle cost was $30,000, and it is used 50% for business, then you have a total of $15,000 of depreciation that you will claim against the business. You may be able to take the depreciation all at once, or spread out over five years, or something else, depending on which method of depreciation you choose and which methods you are eligible for.

 

You can also deduct on going vehicle costs as a business expense. If the vehicle is used 50% for business, you can deduct 50% of your insurance, 50% of your fuel and repairs, and 50% of the interest on the car loan as business expenses.  (You can’t deduct the principal part of the car loan payments, because that expense is taken care of by depreciation instead.)

 

All the rules for using a personal vehicle for business are in IRS publication 463. You may want to speak to a tax professional to help you set up your accounting methods and learn what records to keep and how to use them to file your tax return properly.

 

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
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