# Car purchase deductions



## gbaugher (Nov 12, 2017)

Thanks in advance for any advice. I am currently using my wife’s car for Uber and plan to buy a car in the next month. I understand the difference between he standard mileage deduction and actual expenses, but is the purchase of the car/taxes/title/fees in any way deductible?


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## Older Chauffeur (Oct 16, 2014)

It is my understanding that the items you mentioned are not deductible if you use the standard mileage rate. If you plan to use the SMR, you must use it the first year the car is available to you for business use. You can then change between the SRM and actual costs in future years.

If you lease, you have to stick with whichever method you choose for the first year. I believe the actual cost method would allow you to deduct the fees paid at the time of purchase. Google IRS Publication 463, page 16-17 regarding business use of a vehicle.

It seems like most TNC drivers benefit from the SRM over the actual expense method, but there may be exceptions. You might want to search this forum for posts by UberTaxPro. He has discussed this issue in the past. Maybe he will see your post and weigh in here.

BTW, the consensus here seems to be that buying a new vehicle to use for Uber is a losing proposition, so I hope you're buying used. Good luck.

Disclosure: I am not a tax professional.


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## UberTaxPro (Oct 3, 2014)

gbaugher said:


> Thanks in advance for any advice. I am currently using my wife's car for Uber and plan to buy a car in the next month. I understand the difference between he standard mileage deduction and actual expenses, but is the purchase of the car/taxes/title/fees in any way deductible?


If you're going to use the SMD for the new vehicle most of the costs associated with the purchase will not be deductible.
If you use actual expense method along with bonus depreciation and section 179 deduction it is possible that you could write off all or most of the cost of your new vehicle in the first year. There are some rules. First, you have to use the vehicle for at least 50% business. Second, if you stop using the vehicle 50% of the time for business you'll have to recapture the depreciation, bonus depreciation and section 179 deduction taken previously. Recapture basically means pay back. 
For most, and especially DIY tax people I recommend using the SMD. The first year might be great using the actual expense method but in the long run you'll fair better with the SMD.


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## Mars Troll Number 4 (Oct 30, 2015)

UberTaxPro said:


> If you're going to use the SMD for the new vehicle most of the costs associated with the purchase will not be deductible.
> If you use actual expense method along with bonus depreciation and section 179 deduction it is possible that you could write off all or most of the cost of your new vehicle in the first year. There are some rules. First, you have to use the vehicle for at least 50% business. Second, if you stop using the vehicle 50% of the time for business you'll have to recapture the depreciation, bonus depreciation and section 179 deduction taken previously. Recapture basically means pay back.
> For most, and especially DIY tax people I recommend using the SMD. The first year might be great using the actual expense method but in the long run you'll fair better with the SMD.


over 150,000 miles SMD totals over $80,000

This is more than enough to cover the total expenses of operating A VERY nice car, or a mid-range car with full commercial insurance.


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## UberTaxPro (Oct 3, 2014)

Mears Troll Number 4 said:


> over 150,000 miles SMD totals over $80,000
> 
> This is more than enough to cover the total expenses of operating A VERY nice car, or a mid-range car with full commercial insurance.


The SMD is a deduction not income. Big difference! For a person in a 25% marginal tax bracket the $80,000 is worth only $20,000 in tax savings. Older Chauffeur was right when he said "the consensus here seems to be that buying a new vehicle to use for Uber is a losing proposition, so I hope you're buying used." above.


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## Mars Troll Number 4 (Oct 30, 2015)

UberTaxPro said:


> The SMD is a deduction not income. Big difference! For a person in a 25% marginal tax bracket the $80,000 is worth only $20,000 in tax savings. Older Chauffeur was right when he said "the consensus here seems to be that buying a new vehicle to use for Uber is a losing proposition, so I hope you're buying used." above.


I know...

But based on my experience, the SMD is enough deductions to completely wipe out my entire uber revenue off the books... or knocking it in half with taxi rates...

Actual expense?

It's hard to get actual expenses to equal the SMD after 20,000+ miles per year. (which around here is just working weekends part time)


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## Older Chauffeur (Oct 16, 2014)

A minor point, Gentlemen, but the IRS calls it the "Standard Mileage *Rate*" so the abbreviation should be SMR.


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## UberTaxPro (Oct 3, 2014)

Older Chauffeur said:


> A minor point, Gentlemen, but the IRS calls it the "Standard Mileage *Rate*" so the abbreviation should be SMR.


Gentlemen? where? Ok how about MD(mileage deduction)and SMR going forward?


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## Older Chauffeur (Oct 16, 2014)

^^^^ works for me.


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