Since the H2 weighs over 6,000 lbs, someone told me there might be a huge tax benefit the first year if you use your car for business??

Does anyone know anything about this??

Since the H2 weighs over 6,000 lbs, someone told me there might be a huge tax benefit the first year if you use your car for business??

Does anyone know anything about this??

Yep, I am looking into this too. There is a tax exemption (I think it is Exemption 179) you can take for any commercial vehicle (and in this context, commercial vehicle is defined as any vehicle that weighs over 6,000 lbs.) that is used for business purposes. The first year exemption is $24,000. Again, though, I am still looking into it.
Thanks,
Matt

A tax deduction!!!!!....I'm all over this like Rosie O'Donelle at a buffet.

Let's stay on this subject until we have some answers. Tax Laws may vary on state levels...but on a federal level....let's check it out!

This subject came up before on this forum and came up empty in the end. $24K sounds too good to be true, but I am all ears. Tell me more, please.

Since I am using mine to drive 95% for business (LOL) we are claiming the deduction. I have a number of friends who have done this sucessfully, first you need to be in a contracting or independent business owner to do it, i.e. get MISC 1099 as your source of income if you work for others, or totally be independent. For example I have a job that I get a W2 but also do independent contract work as well. You can not do it if you work for someone else and get only the normal old W2. As long as the purchase is made in the year of the deduction, up to 31 Dec 2002. It is a tax loop hole. That is why lots of high dollar earners have Suburbans and Tahoes or big pick ups. Most of the vehicles like this are eligible. We have looked VERY closely at this deduction and reviewed it with our accounting firm, the result being it is totally deductable and legal. The remaining cost is depreciated over the next 5 years. So it is 24 or 25 grand off the tax owed. I must admit, this fact was a major decision factor for our purchase of the H2.

"Let me show you my gun collection"

Thanks Sona. I spoke to my accountant and he basically said the same thing. Since I'm a commercial real estate broker (independent contractor) I would qualify.

This is great. Isn't it great to be an American and for Uncle Sam to subsidize our toys.. [img]/infopop/emoticons/icon_smile.gif[/img]

Here's another thought for those of us who have to finance and pay out the H2.

Take out a home equity loan to pay off the H2. Interest rate for the equity loan should be about the same and the interest in most cases is tax deductible.

At least this is what I heard. I haven't checked it out yet for my location.

Jim
Red H2 in Texas

<BLOCKQUOTE class="ip-ubbcode-quote"><font size="-1">quote:</font><HR>Originally posted by Texas Red:
Take out a home equity loan to pay off the H2. Interest rate for the equity loan should be about the same and the interest in most cases is tax deductible.
<HR></BLOCKQUOTE>

Another option is to do a refinance with a cash out option. The interest rate is lower than I could have gotten for a car loan plus it's tax deductible. And, if you increase your payments to 'pay off' the truck in 5 years, you get the added bonus of paying off your mortgage early. So, after a refinance, I'm paying the same I was paying for my house payment and MDX, knocked 5 years off the original loan and, can knock another 3 1/2 yrs off the mortgage. All of this made the H2 a bargain! And, I have the title.

Kim

KAC
'03 Red Adv Series

This is the only reason it makes sense for me to buy one....I currently have a Sierra HD 2500 with the 6.0 Vortec (nearly same motor as H2) as a business truck and love it. Unfortunately it has reached it maximum tax depreciation benefits. You definitely have to have a legitimate business with a position that allows you to do this and keep mileage logs or you will get hammered by Uncle Sam. I know several people that have. Fines are nasty.

I believe the tax rules state the vehicle must have a 8k Gross Vehicle Weight Rating (the vehicle weight is not relevant). The H2 qualifies. Many of the other mid-sized SUV's don't (a light duty Tahoe for instance is on the edge).

Good luck.

BIG article on this topic in the Wall Street Journal today in the Personal Journal. All those interested may want to pick up a copy.

Here's a link to the Detroit News article referred to in the WSJ:

[url=http://www.detnews.com/2002/autosinsider/0212/18/c01-38875.htm]

Nobody wants to be audited...but nobody wants to give up a great deduction either. When it comes to having a vehicle used for business the IRS can be sticklers. It helps if you have a 2nd vehicle that you can claim is entirely used for personal stuff, while the "work truck" is all about work.

That's why I've kept my old car sitting around...just for back-up and to substantiate having a personal use vehicle...and even with that, it's a good idea to show the work-truck as only 80% work related anyhow. Just a thought.

We keep a old volvo and my F-150 around...

"Let me show you my gun collection"

bklynh2srock -

I'm a little confused.

I thought only SUV's that weighed more than 6,000 lbs. could qualify for this deduction, yet the article lists several SUV's weighing under this that qualify??

What if your small business turns out a negligible or $0 profit? I have a small business that will be starting up this coming spring but will probably not generate any revenue until 2004. The next year will be spent on product development, etc.
Is this write off beneficial for me as well, having a low/no profit business? Or does this only work if your business is very profitable??

Sorry, I'm a little new to the small business & related tax scene...

- Dan

I think the weight issue refers to GVWR not curb weight. The vehicles listed in the article would have a GVWR of 6000 pounds. GVWR for H2 is 8600 lbs. and curb weight of 6400+lbs. Interesting to note however of the 38 listed vehicles H1 nor H2 are not mentioned in article. Journalists remember it when they want to slam it for gas mileage though!

When dealing with IRS be sure and keep a detailed log of business use verses personal use of a claimed vehicle, otherwise they might disallow a claimed deduction. We have a Venture van as part of a "S" Corp and our accountant advised us to keep the same records of vehicle use as we did before we incorporated and only claimed mileage on business use of a personal vehicle.

Don

Weight is based on gross weight of 8600 Ibs.
The deduction adds to your loss, your current year loss can be carry over to future years. That is if you intend to make money in the future years.

Every tax case is different, in my case I have been audited 4 years in a roll several years back, each time last months with IRS agent stationed in a office we gave him in my bldg. completed with his own laptop. I almost thought he was my employee. The MAIN point here is that they never checked auto log or expense receipts as conventional wisdom indicated. They mainly traced money flow in and out of all accounts, origin/reason/where it went, they tried to find unreported income or cash. All cases are different. Didn't bother me that much, I always follow the laws and rules, and all turned out clean and good.

What company structure would benefit more from this? Would it be more beneficial to be structured as an LLC and have the tax benefit pass through to your individual income tax? Or does this work better if your business is set up as a corporation, where the tax affects only the company, not the corporation holder?

We should have a financial forum!
- Dan

Dan, As long as you own the company, the structure does not really matter. If it is a "C" corp, the corporation will pay less taxes. If it is an "S" corp, or an LLC, the bottom line income of the company will flow through to you and be taxed at your personal tax rate. Therefore, any savings to the company will also result in less taxes. Either way, you win.

It is more complicated than this, though. There are also things to consider when you sell the vehicle. In order for the transaction to be "closed out" on your books, you need to sell the vehicle at some point. If you merely trade it in, the book value is rolled over into the new vehicle and is calculated in it's cost basis. If you do sell it outright and the sale is for more than book value, you will create additional tax liability. Just be careful how you handle th whole transaction and discuss it with an accountant before hand. You won't want surprises.