Section 179 accounting question

[capitalst]

Sorry to bug you accounting people. My accountant is impossible to track down right now due to tax season and I would like figure out this Section 179 rule.

I'm thinking about leasing a new BMW X5 and want to get more details on the section 179 deduction. I know the senate is still making a decision on the higher deduction amount and so on but I think the max of 25k is still fine for this purchase I think.

Question is this.

I'm self employed and if I leased a for example 90k sticker but 85k negotiated vehicle I would be able to take 25k as a deduction off the 85k leaving 60k to do the first years 20% depreciation which would be 12k. So year one I would be able to write off 37k. Now the second year I would get to depreciate 32% depreciate right which is that off the 60k or 48k? How would that all work out?

Last question if I get rid of the X5 after the 3rd year do I have to repay or redo things tax wise for the 25k deduction since i didn't keep it for 5 years? Do I have to figuring anything else out that would be a cost if I return it in 3 years?


I'm trying to see if this would make sense vs just leasing it and not doing the section 179.

[chrisfc923]

Originally Posted by capitalst

Sorry to bug you accounting people. My accountant is impossible to track down right now due to tax season and I would like figure out this Section 179 rule.

I'm thinking about leasing a new BMW X5 and want to get more details on the section 179 deduction. I know the senate is still making a decision on the higher deduction amount and so on but I think the max of 25k is still fine for this purchase I think.

Question is this.

I'm self employed and if I leased a for example 90k sticker but 85k negotiated vehicle I would be able to take 25k as a deduction off the 85k leaving 60k to do the first years 20% depreciation which would be 12k. So year one I would be able to write off 37k. Now the second year I would get to depreciate 32% depreciate right which is that off the 60k or 48k? Also, since I'm leasing this can I write off the lease payments as well or one or the other? How would that all work out?

Last question if I get rid of the X5 after the 3rd year do I have to repay or redo things tax wise for the 25k deduction since i didn't keep it for 5 years? Do I have to figuring anything else out that would be a cost if I return it in 3 years?


I'm trying to see if this would make sense vs just leasing it and not doing the section 179.

i'm no CPA but how can you depreciate something that you don't own?

[opasha]

Here is some helpful info:

http://www.watsoncpagroup.com/kb/Automobiles-and-LLCs-S-Corps_169.html

http://www.section179.org/awesome_vehicles_that_qualify_as_a_write_off.html

http://www.section179.org/section_179_vehicle_deductions.html

I don't think anything below 6000lbs like the X5 qualifies.

[POBA]

Originally Posted by opasha

Here is some helpful info:

http://www.watsoncpagroup.com/kb/Aut...Corps_169.html

http://www.section179.org/awesome_ve...write_off.html

http://www.section179.org/section_17...eductions.html

I don't think anything below 6000lbs like the X5 qualifies.

opasha, I always read your posts. You are quite a gentleman. Thank you sir for your thoughtful contribution

[opasha]

Originally Posted by POBA

opasha, I always read your posts. You are quite a gentleman. Thank you sir for your thoughtful contribution

Thank you for the kind words, and you are most welcome .

[Slurrybomber]

Originally Posted by opasha

Thank you for the kind words, and you are most welcome .

It's the GVRW that has to be 6000lbs or more.

[opasha]

Originally Posted by Slurrybomber

It's the GVRW that has to be 6000lbs or more.

X5 can't match that unless you're carrying 5 people each being 200lbs or more in a 50i (50i is around 5100 lbs). http://en.m.wikipedia.org/wiki/Gross..._weight_rating. Not sure what your point is. Can you elaborate? Just trying to understand what you're saying.

[Slurrybomber]

The 179 deduction requires the gross vehicle weight rating to be 6000 or greater. My x5 50i
Has a rating of 6550lbs, a x35 should be around 6200lbs.

[opasha]

Originally Posted by Slurrybomber

The 179 deduction requires the gross vehicle weight rating to be 6000 or greater. My x5 50i
Has a rating of 6550lbs, a x35 should be around 6200lbs.

Ah, the total weight it can handle. That makes more sense. I misunderstood it as what it needs to be to qualify (not even sure why I thought that - silly me ). Thanks for the correction .

[chrisfc923]

I'm still confused... reading over details for section 179 to me it seems like you need to own the car to take advantage of it. I still don't get how you can depreciate something you don't own?

[bmwhoo]

You should consult your accountant, but mine said the following:

1) Had to be titled to the business ideally - BMW FS is great about doing this
2) Vehicle has to be kept for the full 5-year period over which it is depreciated
3) Upon disposal, it needs to be traded in so as to not trigger gains / income

Based on the above, I'd also assume it has to be owned as leasing does not make sense. I am actually in discussions with her now to ask about the whole leasing vs. section 179 thing because am thinking of switching to a car / suv that is less that 6,000 gvwr

[Khurram]

I've been deducting my vehicle expenses for the past 4 years through my business with my accountant's assistance.

I've never heard of being able to use section 179 for a leased vehicle but I could be wrong.

The way I do it is this:

Calculate a % of how many miles are used for business vs how many are used for personal.

Now for example if your vehicle expenses are $1000 for the year and you used the car 72% of the time for business, you can deduct $720.00

The alternative is to take the mileage deduction which I believe is 50 some odd cents per mile used for business. For an expensive the vehicle, the "actual expenses" method almost always is more beneficial. You can add all your fuel, insurance, maintenance, lease costs etc. and then deduct the % of that total equal to the % that the car was used for business purposes.

I would be very interested to know if leasing a vehicle over 6000 lbs qualifies for 179 in addition to actual expense deductions.

[capitalst]

I read this on many different sites regarding leasing and Section 179.

Leasing and Section 179

Did you know that you can lease and still take full advantage of the Section 179 deduction? In fact, leasing with the Section 179 deduction in mind is a preferred financial strategy for many, as it can significantly help with not only cash flow, but with profits as well. With a properly structured lease you can still take full advantage of the Section 179 Deduction, yet make smaller payments. You can acquire and write off $25,000 this year, without actually spending 25,000 this year. Manage cash flow with lease and still take the Section 179 Deduction.

[bmwhoo]

To further clarify, the conditions I listed above apply if you want to take depreciation on the asset.

But apparently, there is a difference between lease types and a lease purchase may allow for the same depreciation deductions...

http://www.jeffbrookscpa.com/tax-sec...car-truck-suv/

[capitalst]

Is the BMW a lease purchase or lease rental????

[chrisfc923]

Originally Posted by capitalst

Is the BMW a lease purchase or lease rental????

Not sure but what you quoted I believe is for business equipment. Leases on those tend to be different as a lot are structured with a 1 dollar buy out at the end of the lease term which is basically a financed deal termed as a lease

[capitalst]

But leasing a BMW with a buyout option at the end of the 36 month lease would this be a lease purchase or a lease rental? Reading that site attached on this thread they stated that it needs to be a lease purchase to be able to do the Section 179 and depreciation schedule.

[chrisfc923]

Originally Posted by capitalst

But leasing a BMW with a buyout option at the end of the 36 month lease would this be a lease purchase or a lease rental? Reading that site attached on this thread they stated that it needs to be a lease purchase to be able to do the Section 179 and depreciation schedule.

Yes but the BMW buyout is based on a residual value. Those equipment leases I was telling you about has no residual value you basically pay for the whole amount and have a dollar buy out. It's classified as a capital lease. I don't think you can depreciate the car you don't own. I could be wrong and I'm no CPA but doesn't make sense to me if you could.

[capitalst]

Would a owners Choice loan make better sense to do the Section 179?