Q-1:

Subject: 179 SUV deduction

 

Hi Kerry,

 

I've been to your web site and blog, thank you for making the information on 179 deductions so easy to understand.

 

I am a consultant with three sources of income for 2007: self-employment, partnership income under an LLC, and W-2 income.

 

Last year I took a 179 SUV deduction on a toyota land cruiser of 25,000.

 

My question for you:

I'd like to find a way to take that nice deduction again in 2007. Can I sell the truck I bought in 2006, then buy another one in 2007 and take the deduction again? 

 

Also, will I face recapturing of depreciation for doing that?

 

lets say this is the scenario:

Paid 28k for the truck on 2006

Sell the truck in 2007 for 29k (toyota land cruisers can appreciate)

Will I owe recaptured depreciation?

29k-28k+25k(the deduction taken in 2007)?

 

Are you able to advise me on federal taxes.  I am in Florida.

 

Thanks!

A-1:

I'm just going to do a quickie refresher on this topic because I have covered it in more depth in numerous previous blog posts.

Basically, if you sell your current vehicle, you will have a taxable gain, which will be whatever your sales price is less the adjusted cost basis of the SUV (cost minus Section 179 and depreciation).  You can go out and buy a new one and claim a new $25,000 Section 179 on your 2007 tax return; but that will be less than the taxable gain from the sale.

A more tax-savvy maneuver would be to trade in the old SUV on a new one.  There is no taxable gain; but you can only claim a new Section 179 on the additional cost of the new vehicle after the trade-in allowance you are given.

If I'm not mistaken, a Toyota Land Cruiser is an SUV and not a truck; so it has a lower maximum Section 179 than a truck would have.

Remember also that business vehicles are just one type of asset that qualifies for the Section 179 expensing deduction.  You can buy other kinds of business equipment and deduct their costs without having to sell your existing SUV.

This is a very basic tax matter and illustrates how dangerous it is for you to continue to try to run your business and tax matters without the assistance of an experienced professional tax advisor.   You should start working with a tax pro ASAP.  You may even want to give potential tax pros this issue and see how they address it before making your selection.

Good luck.

Kerry Kerstetter

Q-2:

Thanks Kerry

 

I'll seek out a tax professional.

 

Can I buy antique office furniture for my office and expense that under 179?

A-2:

As long as you actually use the furniture in your business and not just as an investment, it should qualify for Section 179 expensing.  I have a lot of info on what kinds of assets do and do not qualify for Section 179 on my website. 

You should always remember that, if you expense the cost of the furniture, its cost basis for you will then be zero.  Any sale of those items will then create a taxable gain for the full amount of the sales price.  Likewise, if you give the furniture to someone else, that person will assume your same zero cost basis. 

These are all issues that should be handled along with a professional tax advisor.

Good luck.

Kerry Kerstetter

Follow-Up:

Great Thanks!

 

Wish you were taking on more clients.

Labels: 179

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 8/15/2007 01:07:00 PM Send this post: