Section 179 Deductions-For Van

[Vincent]

Jurisdiction

Illinois

Hello,

I didn't see a tax section so I hope this section is fine to post in.

Details:

• In the State of IL
• County: Cook
• Bought July of 2020
• I am the first owner of the Van. Only had 4 miles on the odometer.
• Van is under 6000 pounds.
• Cost of Van with Tax, Warranty Ect was around $28,600
• Placed into Business Service next day after buying it.
• Used for 95% of the miles (Which are logged) for business in 2020.
• I have (1) other passenger car that I use for Business and Personal. (Mileage is logged for business)
• Used almost 14,000 miles in 2020 for Business. That is about 95% for Business.

• Bought Brand New Minivan for 95% business travel/ Work.
• Bought meaning I placed a down payment and paying monthly. So bank still owns it for a few more years till its paid off. Not sure if having a payment makes a difference vs buying the Van 100% outright.

Questions:

I am trying to figure out if I should take the full description of the van in this first year while I have the chance to on my taxes?

• Interest Paid- Can I write off the interest paid towards the loan of the van if I fully deprecation it?
• Can I write off the interest paid on the loan if use the standard millage instead?

• Sales Tax Paid- Can I write off the sales tax paid (Currently lumped into the loan) If fully deprecation is taken or use the standard millage instead?

• Can I claim millage for Business use the future years if full deprecation has been made on the Van?

Thanks in advance!

 

[Tax Counsel]

I am trying to figure out if I should take the full [deduction on] the van in this first year while I have the chance to on my taxes?

Usually it's the better deal to take the full § 179 deduction that you are eligible to take. Note that there are several limitations on the deduction, though, including a limitation based on the earnings of the business. In some situations it is better to not take the § 179 deduction and simply depreciate the vehicle instead. You might want to ask a tax professional to review your situation and advise you which is best if you are unsure.

Can I write off the interest paid towards the loan of the van if I fully deprecation it?

You may deduct the business interest you pay as a business expense. That's an additional expense you have over the cost of buying the vehicle and the depreciation or § 179 deduction that you take for buying the vehicle doesn't disqualify you from deducting the interest you pay.

Can I write off the interest paid on the loan if use the standard millage instead?

Yes. The standard mileage rate is a way to deduct your depreciation and expenses of operating the vehicle. It doesn't take into account interest. Again, the interest is an additional expense you pay over the costs of buying and operating the vehicle.

Can I write off the sales tax paid (Currently lumped into the loan) If fully deprecation is taken or use the standard millage instead?

You include the sales tax you paid to buy the van as part of the cost of buying it. So it either gets included in your § 179 deduction or as part of your depreciation deduction. You do NOT take a separate deduction for the sales tax paid to buy the van.

Can I claim millage for Business use the future years if full deprecation has been made on the Van?

You either take (1) the standard mileage rate OR (2) deduct the actual costs of operating the van for business plus the depreciation expense. You don't do both.

You ought to look at IRS Publication 334, Tax Guide for Small Business. It will answer most of the federal tax questions you have about your business.

 

[Tax Counsel]

I didn't see a tax section so I hope this section is fine to post in.

And there is a tax section on these boards. So put your future tax questions there.

 

[Vincent]

Usually it's the better deal to take the full § 179 deduction that you are eligible to take. Note that there are several limitations on the deduction, though, including a limitation based on the earnings of the business. In some situations it is better to not take the § 179 deduction and simply depreciate the vehicle instead. You might want to ask a tax professional to review your situation and advise you which is best if you are unsure.


You may deduct the business interest you pay as a business expense. That's an additional expense you have over the cost of buying the vehicle and the depreciation or § 179 deduction that you take for buying the vehicle doesn't disqualify you from deducting the interest you pay.


Yes. The standard mileage rate is a way to deduct your depreciation and expenses of operating the vehicle. It doesn't take into account interest. Again, the interest is an additional expense you pay over the costs of buying and operating the vehicle.


You include the sales tax you paid to buy the van as part of the cost of buying it. So it either gets included in your § 179 deduction or as part of your depreciation deduction. You do NOT take a separate deduction for the sales tax paid to buy the van.


You either take (1) the standard mileage rate OR (2) deduct the actual costs of operating the van for business plus the depreciation expense. You don't do both.

You ought to look at IRS Publication 334, Tax Guide for Small Business. It will answer most of the federal tax questions you have about your business.

Hello,

Thank you for the quick and detailed response.

It is much appreciated!

Thanks for the additional link as well and the link to the tax section.

I will talk with a CPA to make sure it gets done correctly.

Thanks again!