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I work as a sole proprietor. I expect my 2008 income to be ...

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I work as a sole...
I work as a sole proprietor. I expect my 2008 income to be approx 70K. If I purchase a pickup truck in 2008 (curb weight 7000 pounds, $50,000) and use it exclusively for commuting to work, can i deduct the entire purchase price against my 2008 income?
Submitted: 10 years ago.Category: Tax
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1/2/2008
Tax Professional: Guru_Guy, Lawyer (JD) replied 10 years ago
Guru_Guy
Guru_Guy, Lawyer (JD)
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Satisfied Customers: 2,418
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Hello,

Commuting costs are not a deductible expense. You could only deduct expenses related to travel between offices, to temporary locations, or while running errands for the business. Commuting costs are considered to be a personal expense.

Many sole proprietors get around this problem by having a home office which they consider their primary office, then travel between offices so that the travel can be considered a business expense. But there are special rules associated with that as well (See IRS publication 587):

http://www.irs.gov/pub/irs-pdf/p587.pdf

Even assuming the car is used 100% for business purposes, you cannot write off the entire cost in one year. A car is considered an asset. You would only be permitted to deduct a few thousand dollars each year for depreciation. Many business owners find it easier to take the mileage deduction, set at $0.505 per mile for 2008. For example, if you put 12,000 miles on for business travel, you could deduct $6060 in expenses, far more than you could take for depreciation.

For more details on writing off travel expenses, take a look at IRS Publication 463:

http://www.irs.gov/pub/irs-pdf/p463.pdf

But just to be perfectly clear, there is no way you can lawfully deduct the entire purchase price of the truck in one year.

Sorry if this is not the answer you wanted, but I hope this helps you understand the situation.

___________________

IRS CIRCULAR 230 NOTICE: Absent an engagement for written tax advice prepared in compliance with the regulations promulgated by the U.S. Department of Treasury, no person prepared the written information contained in or accompanying this communication for use or reliance, and no taxpayer can, therefore, use or rely upon the written information contained in or accompanying this communication, (i) to avoid any penalties that the IRS may impose, or (ii) for the purpose of promoting, marketing, or recommending to another party any tax-related matters.
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Customer reply replied 10 years ago
answer not consistent with what i have read. why would my situation not qualify for a section 179 deduction?
Tax Professional: Guru_Guy, Lawyer (JD) replied 10 years ago
As you described in your original question, you intended to use the vehicle to commute from home to work. That does not qualify as a business expense, thus making the vehicle ineligible for the 179 deduction.

If the vehicle primarily for business purposes, you may opt for the 179 deduction, but it would be limited to a maximum of $25,000. A 2004 change created this limit unless the GVW is over 14,000 pounds, or one of the following applies:

-- Designed to seat more than nine passengers behind the driver's seat,

-- Equipped with a cargo area (either open or enclosed by a cap) of at least six feet in interior length that is not readily accessible from the passenger compartment, or

-- That 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.

The remainder of the cost would have to be depreciated over five years. So by opting for this, you may be able to deduct a substantial portion of the cost in the first year, but not all of it.

However, this comes with some very important caveats.

First, Congress is considering reducing or eliminating the 179 deduction for SUV's. They could do this for the 2008 tax year, meaning after you buy the car, that deduction you counted on has disappeared.

Second, even under current law, if you end up using the vehicle in later years for less than 50% business use or if you sell the car before the end of the five year depreciation period, you may find yourself having to recapture the write off in that year, meaning if business goes bad, you are making less money and working less, you will find yourself also tied to a hefty tax bill to repay part of that initial write off.

But with these caveats, the 179 deduction might work for your situation if you are not primarily using it for commuting. I don't want to breeze over the main point of my initial answer. Commuting costs are not a business expense and a car or truck used exclusively for commuting is not eligible for a business expense of any sort.
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Customer reply replied 10 years ago
I have read through your answers carefully and am more confused than ever. I don't think your answers are consistent.

you say i cannot deduct commuting costs, period. then you also say, "If the vehicle (sic) primarily for business purposes, you may opt for the 179 deduction,..."

so which is it? does "business purposes" mean other use than getting to work?
Tax Professional: Guru_Guy, Lawyer (JD) replied 10 years ago
Business purposes means traveling between offices, or doing deliveries, or other job related work. Commuting from home to the office is very clearly and explicitly defined as a non-business purpose. If your business does not require a vehicle and you use it only for commuting, it does not qualify as a business purpose.
Guru_Guy
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