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Category: Tax
Satisfied Customers: 10109
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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What is the most tax-adventitious purchase or lease

Customer Question

What is the most tax-adventitious purchase or lease situation for a strictly work vehicle? I am open to all options. This will be a new cargo van, financed, no personal use whatsoever. I am a sole-proprietor currently, but am willing to set up an S-corp
if there are distinct tax advantages. Please advise.
Submitted: 1 year ago.
Category: Tax
Expert:  Lane replied 1 year ago.



There are basically two ways to deduct business use of a vehicle; (1) Actual use and (2) Mileage


(1) Actual use includes depreciating the vehicle over it's useful life (based on IRS tables - I can get this for you - 5 years for vehicles I believe) PLUS oil & gas, maintenance and repair, (essentially ALL actual costs of the vehicle - including depreciating it's cost over time)


(2) By using the IRS published mileage rate (57.5 center per business mile driven)


You can only use one, not both.


Now, if you want a LOT of immediate gratification, there's IRS section 179, which says that you can accelerate ALL the vehicles depreciation into the first year pace into business (the limit for 2015 is $25,000) and you would still be able to deduct the OTHER parts of actual use as they occur.


The S-COrp won't help. As a sole proprietor, you'll deduct this on the schedule C. (business income or loss) You MIGHT want the liability protection that an LLC can provide, but the deduction (the benefit) would be essentially the same for ALL passthroughs (sole-prop, LLC, partnership and S-COrp)


Here's some information on the Section 179 expense:

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