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Can I deduct a second SUV for business?

 

Dear Tax Talk,
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. -- Dean

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Dear Dean,
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, minus

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.

 
-- Posted: July 14, 2004
   

 

 
 

 

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