# Sales tax on car purchase



## Skinny1 (Sep 24, 2015)

Question, will max out State and Local taxes @ $10k. The car for business use has sales tax not calculated in that portion.

Can I separate out business car I will be using SMR on and calculate business use % for the Sales Tax and deduct that on schedule C (business expense)? 

Thanks


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## UberTaxPro (Oct 3, 2014)

Skinny1 said:


> Question, will max out State and Local taxes @ $10k. The car for business use has sales tax not calculated in that portion.
> 
> Can I separate out business car I will be using SMR on and calculate business use % for the Sales Tax and deduct that on schedule C (business expense)?
> 
> Thanks


Yes. If the sales tax was paid on a 100% business use vehicle it would have to be added to the basis (purchase price).


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## Skinny1 (Sep 24, 2015)

UberTaxPro said:


> Yes. If the sales tax was paid on a 100% business use vehicle it would have to be added to the basis (purchase price).


I understand that , so this vehicle will be about 70-75% business use ... what I've been averaging. I will use the SMR for depriciation purposes.

I pick up in a week, what I want to know is can I deduct that sales tax portion *70% as a business expense?

This would allow me to have the Salt taxes maxed at $10k(property and other taxes paid) but also write off some of the taxes on the business vehicle. Any problem with taking full amount up to 70% even though we are in 4th qtr?

Business vehicle taxes and registration , on schedule C so I'm assuming this will reduce my net business income and possible 401k contribution.

I've researched the heck out of this and everything points to yes I can.

Thanks for your help.


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## Skinny1 (Sep 24, 2015)

What Turbo Tax states about SMR and also sales tax . I'm reading online "value added taxes" are deductible even if using SMR. Listed on schedule C under taxes as a writeoff for example.

I just found an older post where you said you can't deduct taxes and use SMR.

Clarification?


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## UberTaxPro (Oct 3, 2014)

Skinny1 said:


> What Turbo Tax states about SMR and also sales tax . I'm reading online "value added taxes" are deductible even if using SMR. Listed on schedule C under taxes as a writeoff for example.
> 
> I just found an older post where you said you can't deduct taxes and use SMR.
> 
> ...


Yes you can!
If you use your vehicle less than 100% for business, you deduct the business related portion on Schedule C and the personal-use portion of the sales tax on Schedule A (if you itemize) assuming it greater than your state income tax deduction.
The tax has to be based on value, not weight of vehicle.


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## Skinny1 (Sep 24, 2015)

UberTaxPro said:


> Yes you can!
> If you use your vehicle less than 100% for business, you deduct the business related portion on Schedule C and the personal-use portion of the sales tax on Schedule A (if you itemize) assuming it greater than your state income tax deduction.
> The tax has to be based on value, not weight of vehicle.


Ive dug plenty of info up.... but from what I see $7500 EV credit , if I apply to business use on the car can be carry forward as a general business credit if not fully used this year? Only in the instance of personal use does it expire and go away is what I see.

I also see that credits do not count towards SE taxes like expenses do in reducing the liability. Is that for 7.5% of the 15% estimate or both sides of the SE taxes due.

Meaning if my SE tax liability @ 15% right now is $3k ..... I can't apply the credit to any of that or is it 50% portion I can apply it to meaning my half.?

These tax things make it hard to figure out a $401k contribution before year end without possibly over contributing .....


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## UberTaxPro (Oct 3, 2014)

Good question... generally only refundable credits will offset SE tax. The EV credit is* non-refundable*. Also, you're already getting an above the line deduction for 50% of the SE tax. So I'm going to say with 99% certainty that the rule is for 100% of the 15%.

If you over contribute to your 401K during the year the mistake can be corrected if done by the tax filing deadline without incurring penalties, double taxation etc...


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## Older Chauffeur (Oct 16, 2014)

Slightly off topic, but if I'm reading this correctly, the 20% pass through deduction for self employed folks isn't going to help with the SE taxes, either. Do you agree, UberTaxPro ?


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## UberTaxPro (Oct 3, 2014)

Older Chauffeur said:


> Slightly off topic, but if I'm reading this correctly, the 20% pass through deduction for self employed folks isn't going to help with the SE taxes, either. Do you agree, UberTaxPro ?


Yes. The Sec. 199A deduction is allowed only for income tax. It doesn't reduce your AGI. Thus, the deduction does not reduce a taxpayer's self-employment income or net investment income . The Sec. 199A deduction is also not allowed in determining a net operating loss deduction.


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## Gilby (Nov 7, 2017)

You folks are making me very happy to pay my tax professional to do all this for me.


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## JoyJonson (Dec 13, 2018)

UberTaxPro said:


> Yes. If the sales tax was paid on a 100% business use vehicle it would have to be added to the basis (purchase price).


I agree!


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