I deduct a second SUV for business?
I took the Section 179 expensing for a 6,000-plus
pound vehicle in 2003. I am self-employed and drive to my medical
office daily. Can I do this again on another 6,000-pound vehicle
for 2004? If audited, do I have to prove that both the vehicles
are used for business for more than 50 percent of the time? Is there
a specific test that applies to proving this business usage (i.e.,
document mileage)? How long do I need to keep the vehicles? Thanks.
First of all, if all you do is drive to your medical office every
day, then you're commuting to work and this is not considered to
be business use. Business use is when you use your automobile during
the business day to travel, for example, between appointments, hospitals,
the office supply and bank. If you work from your home, then usually
all your mileage connected to business from home is considered business
usage. But since you have a medical office, this would be considered
your business location so that travel from your home to the office
is considered personal use.
Section 179 expense is the allowance of a deduction
for the cost of an asset used in business more than 50 percent of
the time. With an automobile, this is usually determined by the
amount of business miles as compared to total miles you use the
automobile during the year. If in one or more years you claim Section
179 expense and accelerated depreciation on an asset and in a later
year the business percentage drops below 50 percent, you have to
recapture the prior excess depreciation.
While you can have more than one automobile at the
same time and it is possible that both are used more than 50 percent
for business, it wouldn't make sense economically to buy the second
auto just to secure the additional deduction. From an audit perspective,
the Internal Revenue Service would probably be highly suspicious
that one of your family members is probably using that second automobile
for more than just business.
You must include any excess depreciation in your gross
income and add it to your car's adjusted basis for the first tax
year in which you do not use the car more than 50 percent in qualified
business use. Use Form
4797, Sales of Business Property, to figure and report the excess
depreciation in your gross income.
Excess depreciation is:
1) The amount of the depreciation deductions allowable
for the car (including any Section 179 deduction claimed and any
special depreciation allowance claimed) for tax years in which
you used the car more than 50 percent in qualified business use,
2) The amount of the depreciation deductions
that would have been allowable for those years if you had not
used the car more than 50 percent in qualified business use for
the year you placed it in service. This means the amount of depreciation
figured using the straight line method.
This recalculation can go on for as long as
you have the automobile.