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Phillip B, EA
Phillip B, EA, Enrolled Agent
Category: Tax
Satisfied Customers: 631
Experience:  Practicing since 2004. Expert in 1040, small business, represent vs. IRS, & int'l tax mattters.
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I own an llc (sole owner) and am looking to purchase an SUV

Customer Question

I own an llc (sole owner) and am looking to purchase an SUV by the end of the year under section 179 for depreciation purposes. When I go to purchase the car do I need to have the business name on the title or can I have my name. Also, would I be able to depreciate it for the entire year even if I purchase it in December. One last question, if I dissolve my business in the future will I have to pay back the depreciation? Thanks!
Submitted: 1 year ago.
Category: Tax
Expert:  Phillip B, EA replied 1 year ago.

Thanks for using JustAnswer.com!

1.) You can deduct section 179 deduction expense regardless of whether the vehicle is titled to you or your LLC.
2.) Section 179 depreciation allows you to deduct up to the entire purchase price of the vehicle in the first year that you own the vehicle -- even if the vehicle is bought in December. If the vehicle is an SUV, a car, or a truck that is under 6,000 lbs Gross Vehicle Weight (GVW), the deduction is limited.
a.) 25,000 dollars for SUV over 6,000 lbs GVW
b.) 11,060 dollars for passenger cars
c.) 1,160 dollars for vans and trucks under 6,000 lbs GVW
3.) If the vehicle either goes below 50% business use or you stop using the vehicle for business before 5 years, you will have to recapture the depreciation into income when either of the events mentioned earlier occur.

Business use is tracked by mileage logs. You will need to maintain a mileage log of all the business miles driven through out the year.

If there are other questions, please reply to my answer so that may assist you further. If this answers your question, please rate my performance between OK and Excellent Service so that I may be paid. Thanks for your business.

Phillip B, EA, Enrolled Agent
Category: Tax
Satisfied Customers: 631
Experience: Practicing since 2004. Expert in 1040, small business, represent vs. IRS, & int'l tax mattters.
Phillip B, EA and 8 other Tax Specialists are ready to help you
Customer: replied 1 year ago.

Hey Philip,


 


Thanks for your answer! How would I go about recapturing the depreciation into income. For instance if I purchase a $25,000 SUV and depreciate the entire amount will I then have to claim $25,000 in income the following year if I no longer use it for business purposes. Also, if next year if I get hired on as an actual employee and work from my home office 50% of the time and work from an actual company office location will I be able to classify that as business mileage if I no longer have an llc. Thanks again!

Expert:  Phillip B, EA replied 1 year ago.
In the year that business use drops below 50%, you will include the recapture amount as ordinary income. To figure the amount to recapture, take the following steps.
  1. Figure the depreciation that would have been allowable on the section 179 deduction you claimed. Begin with the year you placed the property in service and include the year of recapture.
  2. Subtract the depreciation figured in (1) from the section 179 deduction you claimed.
  3. The result in (2) is the amount you must recapture.

Basically, you refigure what the depreciation should have been without section 179, subtract it from the 179 amount that was deducted, and include the difference in to income.

 

Here is an example from IRS publication 946:

 

Example 1. Shirley Butler, a calendar year taxpayer, bought and placed in service on February 12, 1998, an item of 3-year property costing $5,000. She elected to expense the property under section 179. Since she deducted the full cost of the property, she did not claim any depreciation for it. She used the property only for business in 1998 and 1999.


In 2000, Shirley used the property only for personal use. Because of the change from business to personal use, she must recapture the benefit she got from the section 179 deduction claimed in 1998. Shirley figures her recapture amount as follows.

 

Section 179 deduction claimed (1998) $5,000.00
Allowable depreciation (instead of section 179):
1998 -- $5,000 x 33.33%* $1,666.50
1999 -- $5,000 x 44.45%* 2,222.50 3,889.00
2000 -- Recapture amount $1,111.00

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