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Cash hiding inside the standard mileage deduction?

Discussion in 'Taxes' started by UberTaxPro, Mar 22, 2017.

  1. UberTaxPro

    UberTaxPro Well-Known Member

    Location:
    CT
    Driving:
    UberX
    Most people think that if you've taken the SMD you've taken all your deductions and there is nothing else to think about. Wrong. You might miss a large deduction when you sell the vehicle.

    The SMD has a built in depreciation amount. For 2016 it is .24 cents a mile. For 2017 it's .25 cents a mile.(See section 4.04 of Rev. Proc. 2010-51) The vehicle you've been taking the SMD on is a depreciable asset and requires recognition of a gain or loss on your tax return when you sell the vehicle. Here's a simple example:
    You buy a car for $35,000 and use it 100% for business. You drive the car for 30,000 miles taking the SMD and then sell the car for $15,000. In 2017 your depreciated basis is $27,500 ($35,000-$7500{.25 x 30,000})
    Your tax deduction is $12,500($27,500-$15,000)

    You need to sell your vehicle to a third party to gain this deduction, a trade in won't work. If you trade your car the tax code adds the basis to the new vehicle.
    Also, if you have a gain on the sale this can work against you. I would say a gain would be rare for a car used for ubering an extended period of time. If you do have a gain a trade in would be better. You can add the gain to the basis of the new vehicle and defer the tax.
     
    Last edited: Mar 22, 2017
    LAuberX, Lee239 and rubivroom like this.
  2. Owneroperator

    Owneroperator New Member

    Location:
    Oregon
    Am I able to deduct my car loan interest like we can our business credit card interest? While still claiming SMD?

    Thank you so much too as I have been reading a lot and you are very knowledgeable and spot on.
     
    UberTaxPro likes this.
  3. UberTaxPro

    UberTaxPro Well-Known Member

    Location:
    CT
    Driving:
    UberX
    Yes, but only the business use % of the interest.
     
  4. bobby747

    bobby747 Well-Known Member

    Location:
    pa
    what about with exchange leasing next year. i am in an uber wav hanicapped van. $170 a week. but i get incentives to drive it in my pay...what do i do tax time >>??? i been driving over 3 years...black suv ..x now this..thanks in advance....i killed my 2015 nissan altima with miles 75k....but i love using thier car with big incentives in pay....gas miles is very poor in city 12...hwy 24...99% city
    thanks in advanced
     
  5. Miles907

    Miles907 Active Member

    Location:
    Milton
    Driving:
    UberX

    Whats going on if i buy used Prius for 8k for ubering and after 50000miles (100% business use) i sell it to third party for 4000$. Is this deductions going to work for used cars? Thank you
     

  6. El Gato

    El Gato Active Member

    Location:
    Cedar Park
    Driving:
    UberX
    how does this work for a vehicle not 100% business use? Just the % of business vs personal?
     
  7. Owneroperator

    Owneroperator New Member

    Location:
    Oregon
    Did u purchase it outright with cash or finance? That right there is the difference if I understand correctly your question

    You can only deduct business use. On schedule C on the bottom it ask about that. It also has a little red flag question;) which is do you or your spouse own another personal vehicle. In my case I do and with my OCD lol I don't drive my other car unless it for business. I will walk my ass or wait till wife is home or drive my crummy down to store. When u put over 50,000 miles on a car a year you worry about every mile
     
    UberTaxPro likes this.
  8. Taxi2Uber

    Taxi2Uber Active Member

    Location:
    Las Vegas
    I bought a car, $6500 cash, for ubering. This being my first year. I think I read somewhere that there is a business startup deduction allowed for the first year. I think it was $5000. Does that sound right?
     
  9. brianboru

    brianboru Well-Known Member

    Location:
    Minneapolis
    Driving:
    UberX
    There is no $5000 business startup deduction per se. But you can deduct business expenses.
     
  10. Taxi2Uber

    Taxi2Uber Active Member

    Location:
    Las Vegas
    I found what I read earlier:
    "You may deduct up to $5,000 in start-up costs in your first year in business. This deduction is restricted if you have over $50,000 in start-up costs. If you have additional start-up costs over the $5,000, you can amortize these costs over 15 years."
    But reading further I found that buying a vehicle does not qualify as start-up expenses, so that doesn't apply.

    It looks as though, if you buy a vehicle for your business, "...generally you must capitalize and depreciate the cost. Such expenses are treated just the same as they would be if you had been operating your business for decades."
    Can someone plainly explain how to "capitalize and depreciate the cost"?
     
    UberTaxPro likes this.
  11. UberTaxPro

    UberTaxPro Well-Known Member

    Location:
    CT
    Driving:
    UberX
    Generally, yes $5000 is the limit for first year startup expense deductions. There are strict rules as to what qualifies as start up expenses. Vehicles for example do not qualify. Amounts over $5000 are amortized over 15 years.
     
  12. Taxi2Uber

    Taxi2Uber Active Member

    Location:
    Las Vegas
    LOL looks like we were typing at the same time.

    Can you help with the 2nd part of my post?
     
    UberTaxPro likes this.
  13. UberTaxPro

    UberTaxPro Well-Known Member

    Location:
    CT
    Driving:
    UberX
    The easiest way is to take the standard mileage deduction...depreciation is built in.
    Capitalize and depreciate the cost just means that you don't take the whole deduction at once. For example, $5000 depreciated over 5 years would be a $1000 depreciation deduction for each of the 5 years. Assets types have different depreciation rules as to how many years you can use.
     
  14. brianboru

    brianboru Well-Known Member

    Location:
    Minneapolis
    Driving:
    UberX
    You can either take actual vehicle expenses (which includes depreciation) or the standard mileage deduction. If you are driving a lot of miles the standard mileage deduction will be better.
     
  15. Taxi2Uber

    Taxi2Uber Active Member

    Location:
    Las Vegas
    So...and I may be phrasing it wrong...the actual cost of buying the car ($6500) is not deductible in any way other than using the SMD (if I'm not amortizing).
     
  16. brianboru

    brianboru Well-Known Member

    Location:
    Minneapolis
    Driving:
    UberX
    That is close enough.
     
    Taxi2Uber likes this.
  17. UberTaxPro

    UberTaxPro Well-Known Member

    Location:
    CT
    Driving:
    UberX
    Yep, if you use the SMD there is basically no other deduction you can take on the vehicle. I don't know how much you drive but 20,000 miles a year at 53.5 cents is $10700 each year!!!
     
    Taxi2Uber likes this.

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