Can I deduct my car as a business expense?

March 8, 2000

Subject:  tax question
Date:  Mon, 14 Feb 2000
From:  Rick Fee

Could you please answer this question?

I have a day job and get a regular W-2 etc. I have two small business ventures that I own also. I incorporated these business five years ago. I file taxes accordingly. I bought a truck last year in October. Some one said I can deduct up to 19,000 of the cost of truck on my taxes. Rule 179. Can I? In the past I deducted mileage, will this have an effect on that deduction? If after taxes I have a net income of let's say X0,000, and a tax bill of appx. X,000. How much could this deduction save me in relation to the tax of X,000?

Answer

Hello Rick,

In order to qualify for the $19,000 "first year expense" deduction, the vehicle must have an unloaded gross vehicle weight of 6,000 pounds or less. Vehicles that weigh less than this amount are subject to a first year depreciation limit of $3,060 for 1999. An income limitation also applies to the "first year expense" deduction.

In order to qualify for the election, the vehicle must be used more than 50% for trade or business purposes.

When you make the election, the vehicle no longer qualifies for accounting for expenses using the standard mileage rate. However, corporations don't qualify to use the standard mileage rate anyway.

You have said you have incorporated these businesses. It sounds like you are claiming deductions for the vehicles on your personal income tax return. This could create some problems unless you are receiving an expense reimbursement from the corporations.

Maybe you need to get some help with your taxes?

Good luck!
Mike Gray

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