4 New X5M Drivers

[t1blackout]

Section 179 is different from the bonus depreciation incentive. They get added together. The "bonus depreciation" is 50% and only applies to new vehicles. The section 179 gets taken BEFORE the bonus depreciation and is up to $25,000 and applies to any vehicle "new to you." The way I remember reading it, the last year of the bonus depreciation is 2017 and then it will be phased down slowly in future years.

The X5M is over 6,000lbs because they use GROSS weight which is different than CURB weight. I'm sure BMW strategically made their cars heavy enough to qualify...

[MRCUR]

Originally Posted by SpeedFreak

So my question is, how are you doing 100% of the vehicle price, or are you instead at the specified $25,000?

The full value write off (100%) is only for vehicles with a GVWR above 6,000lbs AND a long bed/cargo area.

[sbash]

You will get to deduct it all, just not 100% in the first year. Our cargo areas do not fit the IRS definition because it is not a 6' or greater bed and there is a passenger area behind the front seats.

First year you get to deduct ($25,000) + (50% of the cost of the vehicle less $25,000) + (first year standard MACRS depreciation which should be an additional 10% after the above deductions due to late year purchase).

Just for fun, lets say that you paid $115,000 for a vehicle. You'd get to deduct:

$25,000 then
50% of $90,000 (115,000 less 25,000) or $45,000, then
10% of $45,000 ($4,500)
In total, first year deduction is $74,500.

On your W-2, your accountant will likely need to show some adjustment to your income due to de minimus personal use of the vehicle. All in all, buying a qualified vehicle isn't a bad deal. If your effective state and federal tax rate is about 50%, then it's like saving $37,000+ off the cost of the above vehicle due to the first year deductions alone.

With all that said, I am not an accountant. I do think I have a pretty good idea of how it works and that you'll find the above is exactly how it works.

[sbash]

Originally Posted by trev230

I have used Section 179 twice now. The vehicle has to be "new to you", not necessarily brand new. There haven't been any changes to the guideline with the exception of them extending it until 2019 with a phase out starting next year on the amount of depreciation you can take. The bonus depreciation has always been in place and allows you to take 50% off the top, not the entire thing. Then small chunks every year after. You There are no incentives for a brand new vehicle. It just has to be "new to you".

Two different rules in place here. Section 179 is new to you. Bonus depreciation is new, not used.

[MRCUR]

Originally Posted by t1blackout

After reading into this further, I'm worried that you are correct and that our expensive CPA told us incorrectly... The BMW dealership seemed to think that they qualified as well... This could be the worst oversight ever.

The X5 does NOT qualify for full depreciation. You can do $25k under 175 (the SUV cap) AND the bonus 50%.

[t1blackout]

Originally Posted by sbash

You will get to deduct it all, just not 100% in the first year. Our cargo areas do not fit the IRS definition because it is not a 6' or greater bed and there is a passenger area behind the front seats.

First year you get to deduct ($25,000) + (50% of the cost of the vehicle less $25,000) + (first year standard MACRS depreciation which should be an additional 10% after the above deductions due to late year purchase).

Just for fun, lets say that you paid $115,000 for a vehicle. You'd get to deduct:

$25,000 then
50% of $90,000 (115,000 less 25,000) or $45,000, then
10% of $45,000 ($4,500)
In total, first year deduction is $74,500.

On your W-2, your accountant will likely need to show some adjustment to your income due to de minimus personal use of the vehicle. All in all, buying a qualified vehicle isn't a bad deal. If your effective state and federal tax rate is about 50%, then it's like saving $37,000+ off the cost of the above vehicle due to the first year deductions alone.

With all that said, I am not an accountant. I do think I have a pretty good idea of how it works and that you'll find the above is exactly how it works.

Great answer, thank you. This is how I understood it originally, if you look at the earlier posts. It seems like a no brainer... We HAD to buy these cars in order to save all of that money!!!

Last night I was misreading some stuff about the full depreciation and thought that I had totally dropped the ball on understanding this properly. I think we should be good to go.

[MRCUR]

Originally Posted by t1blackout

Great answer, thank you. This is how I understood it originally, if you look at the earlier posts. It seems like a no brainer... We HAD to buy these cars in order to save all of that money!!!

Last night I was misreading some stuff about the full depreciation and thought that I had totally dropped the ball on understanding this properly. I think we should be good to go.

I look at it this way - I have to spend the money one way or another, either in taxes or a qualifying vehicle.

Of course I'd much rather have the vehicle, so...

[IndyM]

Originally Posted by MRCUR

I look at it this way - I have to spend the money one way or another, either in taxes or a qualifying vehicle.

Of course I'd much rather have the vehicle, so...

Again, congrats!

Based on my understanding, the math you presented above is correct. BUT, one thing everyone considering the Sect 179 and/or Bonus Depreciation needs to understand is that while these tax codes do provide a substantial tax savings in the year in which you take the depreciation, you WILL eventually have to pay taxes on the income you offset through depreciation. When you sell the vehicles (sell outright or trade in), you will have depreciation recapture and every dollar that you depreciated on the vehicles will become taxable in that tax year. It's my understanding that the only way to prevent this is to buy another vehicle... and the way the math works, it generally has to be one that is more expensive. This allows you to "kick the can down the road" and continue to defer your tax liability.

I'm in commercial real estate, and we get the benefit of very favorable depreciation on our assets, and it helps to keep the current income tax bill low. But, if/when we sell a property, not only are we liable for capital gains from the sale, but also for the depreciation recapture. Same concept with the Sect 179 vehicles.

Don't get me wrong, the Sect 179 is still very advantageous and I've done it twice now. But anyone considering using it shouldn't assume that it's as simple as spending the money to pay taxes OR buy a car, because you'll eventually have to pay the taxes!

Disclaimer... I am not an accountant, so please don't rely on any of my commentary as sound financial/tax advice! Just sharing based on my understanding and experience with this.

[Fabs///M]

That's beautiful. Happy new year

[BrooklynG87]

Congrats again! Gorgeous fleet of "company cars" you guys have! Super awesome. Sorry to hijack this thread but can this be done on a lease or finance also or must the vehicle be purchased outright?

[raysspl]

Congrats fellas! What's the name of the IT company & what specialization(s)? I run a 3D printing design & 3D printers company here in LA. My backgrounds are in software engineering, product design, accounting, & econ. Cheers, my fellow entrepreneurs!

[Arcades]

Neat

[mgaciah]

Wow. thats nice, I dont think that even a BMW dealer can show that pic with 4 X5Ms together.

[MRCUR]

Originally Posted by BrooklynX6M

Congrats again! Gorgeous fleet of "company cars" you guys have! Super awesome. Sorry to hijack this thread but can this be done on a lease or finance also or must the vehicle be purchased outright?

Section 179 only applies to purchased (financed) vehicles. But you can of course write off lease payments too.

[JSCO]

Didn't think you guys would find all 4...very nice...enjoy!!

[Sharp_Cai]

jealous

[C5 FOR]

What's the details on the "tax incentives".

U.K. Resident. And tax incentives on rather expensive and gas gusling beautiful machines are non existant....

[SteveSpy]

Originally Posted by t1blackout

We finally picked up our cars today for the management team (big new-car tax write-off incentive for vehicles of this weight in 2016)! Big thanks to BMW Charlottesville and everyone on this forum who helped us get a great deal and make an informed decision in a very short period of time. We could not be happier. These cars make no compromise.

Background story from previous thread: http://f15.bimmerpost.com/forums/sho....php?t=1333243

Attachment 1544929

Attachment 1544930

So... you hirin'??

[vpatel867]

Saw this on BP front page. Very cool and glad workout for you guys! Always look for those little tax incentives.

[WI_Rob]

This has got to be the best post EVER!!! Congrats to the OP. Well done in earning your success with your team.

Regarding the need to pay taxes eventually based on the depreciation, I suspect you'll find a way to do this again!!! ??

[bunker]

bunch of fuckin' ballers.
I love this.

[Nkc]

Pretty cool but why not 4 different high end suv to keep things fresh. Swap cars with your partners every week or two.

X5M, range rover sport, cayenne turbo and a gle63 all in the same color to maintain cohesion at the company parking lot.