Any Suggestions From The Accounting Types?

[timandjulie]

Hello all,

First..this post is not relevent to many but for those of us who are self employeed...paying tons in taxes...this is a great question;

I love my old paid for 94 LS400. I got everything working perfectly...has about $14k invested all together. Just got back from a 400 mile drive and couldn't be happier.

We need to get another car this fall. From the looks of things we are going to owe big money in taxes this year. (nice problem, I know). There is a tax law that allows self employeed business owners to write off 100% of a vehicle that weights over 6000lbs off in the first year. So, if you are in the 40% tax bracket and you buy a new Porsche TT SUV....you actually reduce the taxes you owe by.....$40,000.

I friggen hate SUVs. But, even more I HATE depreciation. I can buy a sweet 98-00 LS for $20,000...pay cash. But, doing so would force me to pay more in taxes. If we buy a SUV I will have to make a payment....and pay interest....and deal with the depreciation....not to mention own a SUV. VS with the paid off LS....its paid off and I already know that they are the worlds best cars. I am not smart enough to figure out why I shouldn't buy the SUV and save the money in taxes....anyone? This is a real issue.

Thanks!

[1UZ-FE]

it depends on exactly how much taxes are for you. Do the math and figure out exaclty how much it would cost you per year and in the long run. Make sure you take into account insurance, cash or loan amount, vehicle tax (the main issue for you), gas, possible service issues, and depreciation. Also, you are gonna have to find a rather large SUV to exceed the 6,000lb you need for this tax write off. My 94 LS weighs about the same as my brother's 96 Jeep Grand Cherokee Laredo V6(just a hair under 4,000lbs or 2 tons). add all these up and this should give you a pretty good idea of what you're up against. You are probably gonna have to do a lot of research to figure all of this out but it's well worth it.

[SW03ES]

I personally didn't take advantage of this deduction because like you I don't care for SUVs and by leasing I got a pretty nice deduction anyways. I pay my taxes quarterly though so I wasn't going to owe much. I agree, run the numbers both ways and figure out which way saves you more in the long run.

The LX470 should be over 6000lbs. Does it have to be new? I dont remember.

[93LSOwner]

RX300: Gross Weight: 4950 lbs.

2004 RX330: Gross Weight: 5245 lbs.

1998-2004 LX470: Gross Weight: 6860 lbs.

2003 GX 470: Gross Weight: 6100 lbs.

[UCF3]

Isn't the tax rule for vehicles over 5000lbs and leased? I've heard there is a list of vehicles, and I think I've heard the BMW X5 is on the list. Isn't that about the same weight as the RX?

[SW03ES]

No, the truck must be purchased not leased. If its leased then you can only write off the lease payments like I do with my car now. If its purchased then you can write the entire vehicle price up to a certain amount off (or is it the entire vehicle price?)

SO, there can be some huge savings for small business owners...

1990LS can post I'm sure he knows more about it.

[chazglenn3]

Check the tax laws a little closer. You can depreciate a vehicle used for business up to $100,000. However, the limit looks to be a little shy of $11,000. It is called a Section 179 deduction and can be found in Publication 463 in Chapter 4 on page 17. I am a small business owner myself. So, you don't have to buy a SUV to lower your taxable income. And, SW03ES, you can also write off the interest on your lease payments as a percentage of business use of the car along with your lease payments. This information is in the same publication.