# New Car



## 142605 (Mar 4, 2018)

UberTaxPro said:


> This thread is over two years old and the guy that started it hasn't been around lately. If you ask this in another thread I'll try to answer.


I know everyone says using a new car for Uber is bad...

...but for those of us with a day job and a significant tax debt can it create the loss I need to make it make sense?


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## 1.5xorbust (Nov 22, 2017)

You can definitely create a loss from a tax standpoint.


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## UberTaxPro (Oct 3, 2014)

Authority said:


> I know everyone says using a new car for Uber is bad...
> 
> ...but for those of us with a day job and a significant tax debt can it create the loss I need to make it make sense?


The Tax Cut and Jobs Act has substantially increased the amount of depreciation that can be taken on business vehicles using the actual expense method. Vehicles under 6000 lbs still have limits ($18,000 first year deduction) but vehicles over 6000 lbs can be expensed 100% in the first year using the section 179 deduction. So, you could go out and purchase a $60,000 SUV(6,000 lbs+), use it 100% for business and create a $60,000 tax deduction for tax year 2018!

When you claim your Section 179 deduction and or bonus deprieciation, you make a deal with the government to keep your business use above 50 percent during the "designated" depreciation periods. Any violation of your deal with the government will bring on "recapture."

Let's say in 2019 your situation changes and you no longer have time to Uber part-time, or your business use drops below 50% because you get busy with your W2 job. So in 2019, the year of violation, tax law recaptures $54,000! That's $60,000 - $6000 (10% ADS straight line depreciation used to recapture). So, in 2019 you'll have to report the $54,000 income on the same form and line that you took the original $60,000 deduction in 2018! If you operate as a proprietor and claimed your Section 179 deduction on Schedule C in 2018 you'll recapture income as other income on Schedule C.
That means the Section 179/deprieciation recapture is going to create self-employment taxes also.

You need to think about your net long-term tax liability, rather than simply focus on short-term savings.

Using the SMR you could purchase a used inexpensive vehicle, uber with it for 100K miles and deduct $54,500 without having any agreement to live up to with the government. A $54500 deduction on a 5k-10K asset seems like a better deal to me for most ride-share drivers.

Also, *to take the 179 deduction you have to have business income!* You can't use it to reduce your income below 0. That is a big issue for most ride-share drivers!
With the SMR method if you want more deductions all you have to do is drive more!


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## UberTaxPro (Oct 3, 2014)

Authority
Just to clarify.... there is a $25,000 section 179 limit on most SUV's over 6,000 lbs. There are still vehicles that escape this rule. So for the 60K vehicle in my last post to qualify it would have to fit under this:
"(ii) Certain vehicles excluded. Such term does not include any vehicle which- (I) is designed to have a seating capacity of more than 9 persons behind the driver's seat, (II) is equipped with a cargo area of at least 6 feet in interior length which is an open area or is designed for use as an open area but is enclosed by a cap and is not readily accessible directly from the passenger compartment, or (III) has an integral enclosure, fully enclosing the driver compartment and load carrying device, does not have seating rearward of the driver's seat, and has no body section protruding more than 30 inches ahead of the leading edge of the windshield." quoted from https://www.law.cornell.edu/uscode/text/26/179 (Internal Revenue Code Section 179(b)(5))
Under I, a shuttle van may qualify
Under II, many pickups with full size cargo beds qualify
Under III, many delivery vans qualify

The #'s in my last post should be $25,000 2018 deduction, $25,000 - $6000 = $19,000 recapture in 2019 for the SUV.

Also, "business income" as used for section 179 does include W2 income because the code treats employees as engaged in the active conduct of the trade or business of the employment. § 1.179-2 https://www.law.cornell.edu/cfr/text/26/1.179-2


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## Skinny1 (Sep 24, 2015)

UberTaxPro said:


> Authority
> Just to clarify.... there is a $25,000 section 179 limit on most SUV's over 6,000 lbs. There are still vehicles that escape this rule. So for the 60K vehicle in my last post to qualify it would have to fit under this:
> "(ii) Certain vehicles excluded. Such term does not include any vehicle which- (I) is designed to have a seating capacity of more than 9 persons behind the driver's seat, (II) is equipped with a cargo area of at least 6 feet in interior length which is an open area or is designed for use as an open area but is enclosed by a cap and is not readily accessible directly from the passenger compartment, or (III) has an integral enclosure, fully enclosing the driver compartment and load carrying device, does not have seating rearward of the driver's seat, and has no body section protruding more than 30 inches ahead of the leading edge of the windshield." quoted from https://www.law.cornell.edu/uscode/text/26/179 (Internal Revenue Code Section 179(b)(5))
> Under I, a shuttle van may qualify
> ...


How does recapture work if business vehiclen is sold at a loss, and replaced with a vehicle still used for the same business trade but no intention of additional bonus depriciation?

Example : regular vehicle , take $18k (10k + 8k ) deduction first year .... sell 2 -3 years later and at a loss due to high mileage on the vehicle. Replace with vehicle used for same trade perhaps identical newer model ? Can you continue on standard depriciation schedule with the new vehicle?

Or is it Pay recapture but also have the loss on sale to deduct so in some ways it's offset?

Question 2: this may be easier

Drive high priced vehicle using SMR rate. After 2-3 years switch over and eventually sell at a loss. Is the loss deductible?

Ex: $50k vehicle
50k miles deducted using SMR

Remaining depriciation $25k

Car sells for $20k

$5k loss is a write off?

Thanks , yes I'm somewhat looking at potential loopholes that are somewhat beneficial. Incremental Rideshare income is taxes around 30-40% when factoring in all taxes.


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