BEST Vehicle Tax Deduction 2023 (it’s not Section 179 Deduction!)

When purchasing a vehicle for your business you have to decide in the FIRST year of service if you will use the Actual Expense accounting method OR the Standard Mileage Rate accounting method for your vehicle tax deduction.

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Timestamps / Chapters
0:00 - Intro
1:34 - Spend LESS Money on your Vehicle
2:50 - My Example (Section 179 Deduction)
4:24 - My Example (Standard Mileage Rate)
6:57 - IRS Section 179 Deduction - is it for you?
8:53 - One last tip!

ABOUT ME 👇

I've been involved in people's financial decisions for 15+ years (7 yrs Real Estate experience & 8+ yrs as a former Financial Advisor)...I now bring the financial successes, mistakes, failures, and best financial habits/tips to you through these videos.

My mission is to bring Financial Awareness to the forefront of your daily decisions so you can: improve your quality of life, increase your net worth, and grow upon your financial literacy. My videos are a reflection of my real-world experience as a real estate investor, stock market investor, student of finance, entrepreneur, and of course...my experience as a Former Financial Advisor.

This channel allows me to share my passion for personal finance, stock market investing, real estate investing, and entrepreneurship. I produce content that I would want to watch, and because of that, I give 100% effort in every video that I make. I also believe in complete transparency and open communication with my audience.

Subscribe if you are interested in:
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DISCLAIMER: I am not a financial adviser or a certified public accountant. These videos are for educational purposes only. Investing of any kind involves risk. While it is possible to minimize risk, your investments are solely your responsibility. It is imperative that you conduct your own research. I am merely sharing my opinion with no guarantee of gains or losses on investments.

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[Citizen_Shane]

That spouse loophole at the end is 🔥🔥🔥.
Thanks bro. Appreciate the heads up.

[sam]

Nice video! I'm planning to open an LLC this year and wanted to know this about car write off. I appreciate you have been very responsive in the comments.

[leo]

Thank you for this video. I just started doing Uber and i think I will use standard mileage rate for tax deduction!

[Saki]

A $170k sports car driven 150k miles over the next three years would incur $30k+ on maintenance, $45k on fuel, $6k on insurance, 6k on interest. So my $170k business expense, ballooned 87k higher and i still have 74k miles more to drive to hit the original Basis. Choosing a $90k Corvette, would give me $49k in additional costs, and require 10k more miles + $3k expenses to hit the original Basis. Similarly a 30k car would be, 28k in costs to depreciate $84k.

So a used pickup $50k should work well if the maintenance is low and you use it a lot. A Luxury mall crawler for the pretty bois would not work out and need to use Section 179 and bonus depreciation to help push it down. I would have never thought of this stuff unless i saw these videos!

[gratefulRed]

i've been taking the standard mileage deduction for my business mileage driven on my personal cars for YEARS....and have never known about this "straight line depreciation" which lowers your "basis" to zero. Have known nothing about "depreciation recapture" either. Neither of my tax professionals I've used (one is a CPA and the other a 20+ year IRS veteran turned book-keeper) ever mentioned this to me. I buy used cars and drive them until they are paperweights. (Honda Accord with 315k miles on it, for example before selling it off).

[Malibuflatliner]

been considering a model Y or model X for the business may go with the Y after this most people reccomend X for the weight

[vivianduty]

This is great content. Very well done, thank you!!

[ToddLloyd]

I hold on to cars for a long time too. My somewhat old Mercedes is paid off, and I rack up a ton of miles on it, and maintenance is cheap.

[HeavenNY]

Going to get more for the standard deduction if you drive a lot of miles. Especially since the mileage $ allowance went up.

[richdibo]

You seemed to ask for edification from a CPA. Accordingly, I will respond.

Transfers to spouses are GIFTS. (IRC §1045.) The donee (recipient) spouse inherits the donor's basis and would be subject to depreciation recapture upon any future sale. You can't sell to your spouse. Besides, what are you going to they don't pay you? The scheme -- to avoid depreciation recapture by "selling" to a spouse -- won't work if the IRS knows about it. The only purpose of this purported sale -- deemed a gift by law -- is the avoidance of additional tax from depreciation recapture. The scheme can be disallowed by the application of the "step transaction" and/or the "sham transaction" doctrine. If the arrangement smells bogus, it probably is -- and the IRS will trample you if given the chance.

Claiming $63, 000 of total estimated standard mile rate deductions over 6 years, representing depreciation on 75% of the $24, 600 vehicle cost and 75% other vehicle expenses ($15, 300), results in claiming an estimated $33, 075 in excess unallowable depreciation. This planning won't work if the IRS is on to you. To claim a depreciation deduction, you need tax basis (generally, your cost). (IRC §167(c)(1), which references §1014.) If you grossly abuse the standard mileage rate -- by creating $33k of bogus basis for depreciation deductions from nothing (no economic outlay), the IRS could deem your vehicle fully depreciated and disallow the portion of the standard mileage rate attributable to depreciation for all years that you depreciated your vehicle. The IRS publishes the standard mileage rates every year in a revenue procedure. They also indicate the portion of the rate that represents depreciation -- generally around 1/2 of the rate. For 2021 the amount is 26 cents per mile. You are required to reduce your basis in the vehicle for this deemed depreciation. Basis is reduced to ZERO, but never BELOW ZERO. The IRS requires a reduced standard mileage rate for vehicles considered fully depreciated (basis = 0). There is a jingle in the tax profession: "NO COST, NO LOSS."

You cite an IRS publication for authority for this treatment, which is not authoritative law. Notwithstanding your misinterpretation of the publication, The Tax Courts ignore them, and they can't be cited as law.

You may be thinking, "Opps ... I got away with it all these years -- even for years closed by the statute of limitations." Generally, the IRS has 3 years from the date the return is filed to assess additional taxes. However, claiming depreciation deductions involves an accounting method. A smart IRS revenue agent would assert an accounting method change and propose an adjustment for the full $33k of overstated depreciation for the year of the examination -- even if some of this adjustment relates to closed years.

Your position is a loser from many perspectives, including the "Pigs get fed, hogs get slaughtered" concept.

Also, in the case of property placed in service before 2016, the original use of the property had to commence with the taxpayer on or after January 1, 2007 in order for the property to qualify for bonus depreciation. So, your used vehicle placed in service in 2015 would NOT have qualified for bonus depreciation.

Mr. Scholl, please have the financial awareness that the IRS may be on to you! You can get into trouble by advising clients to take inflated or bogus deductions.

Anyone can Google me if you want to discuss this.

[sponge]

You either live in Colorado or take ski vacation to Breck. Most people outside of Colorado would say Breckenridge

[surendraramanapudi]

thank you for the video..I subscribed all your videos ..very knowledgeable.. BTW is Model X or Y are qualified for 179 discount ?

[andregraf]

Thanks for sharing that info!

I’m a bit confuse about the 179 section since I thought that it would not affect how I choose to do the write off (standard deduction or mileage deduction). Are you sure that if I do the 179 section I cannot choose to do mileage deduction instead of standard? My plan was to use the 179 as a tesla model x, and use the mileage deduction way since I will be driven a lot (reason why I’m getting an electrical vehicle that I can charge at home with my solar). Could you clarify? Thank you!!

[traindirtyliveclean]

Solid Video, just learned about 179 & need to exceed 6k lbs & also to stay in the black. All i want to know is this - can you continue to take both straight depreciation & mileage deductions over many years to the point where you've exceeded the vehicles value ? Buy for 10k, write off 20k over 10 years because you drive a ton for work type situation ?

[lauraa.x_o]

Jeep has this thing on their website about a 168(k) section & the 179 section that apparently up to 100% expensing can be "written off"

[peterkarantonis]

Great video. I'm considering a Tesla. Are energy rebates available for corporate entities?

[JCV]

Thank you for making such a great video! I am a full time rideshare driver, driving approximately 40k miles a year (80% business) I used the standard mileage deduction last year and continue doing so this year. Do I have to worry about the vehicle basis at any point if I only use the standard mileage deduction? I believe that it was mentioned on video clip minute (8:43). Since my car was a lease and I bought it this year, used cars are not depreciating as much as previous years…

[HeavenNY]

Tax time is coming again. So here’s the question. Tax guy wrote depreciation on vehicle for my taxes last year on my old Honda Civic. Well last year in April I got a new vehicle Honda Hrv. So do I have to stay with the depreciation method now or can I just se the standard deduction. Because it would be more for the mileage since my vehicle is new and I don’t need repairs.

[LightGesture]

Interesting. I took the standard mileage on my f250. Had it about 3/4 years now and just fixed her up real hoping to get 10k out of it. I only owe 7k, purchased for 21k.

[tanw]

Hi another great video - I was wondering if you knew whether I could deduct expenses related to Zoom. I’ve been paying monthly expenses for Zoom on behalf of my church, as a “love offering” but I was wondering if I’d be able to write it off as a deduction (if you had a previous video on such a question, can you let me know too). Thank you so much!