Really?? "Hummer loophole" (Section 179+bonus depreciation deductions) for simple rental property biz?

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ebotrd
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Really?? "Hummer loophole" (Section 179+bonus depreciation deductions) for simple rental property biz?

Post by ebotrd » Sat Apr 07, 2018 11:40 pm

First, I want to say the insights from this bogleheads community over the years have been much appreciated!

Do you tax experts out there think we might qualify for Section 179 expensing and bonus depreciation in our scenario doing Schedule E?

My wife & I self-manage ("actively manage") an airbnb rental property (simple Sole Proprietor arrangement, no LLC/incorporated) about 100 miles away. We used to live up there but had to move for work a few years ago. We hire help sometimes to clean or let folks in when we can't but about twice a month we drive up to meet guests, clean, restock things, and/or work on the house ourselves.

We used to drive our Odyssey on the trips, so for taxes we do a Schedule E and have always just taken a standard mileage deduction. However, we just bought a new SUV (Tesla Model X) in December 2017 and plan to use it for the trips up there (2018) once we sell the Odyssey.

I've been trying to read up on the 2017 tax changes. It seems like vehicle expenses for businesses have better tax deductions now, especially if >6,000 pounds gross weight. I'm a little confused as we always just do Schedule E (not Schedule C). Over 50% of our driving in this vehicle is for the rental.

HELPFUL REFERENCES I'VE SEEN:
https://turbotax.intuit.com/tax-tips/sm ... /L6hi0zzzh
https://forums.tesla.com/forum/forums/a ... d-sec-280f
Last edited by ebotrd on Sun Apr 08, 2018 5:56 pm, edited 1 time in total.
When something is important enough, you do it even if the odds are not in your favor. -- E. Musk.

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Re: Section 179+bonus depreciation deduction Tesla Model X GVWR 6,000 landlords actively manage rental property Could it

Post by denovo » Sat Apr 07, 2018 11:45 pm

You better keep good records! This is something that would trigger an audit I bet.
"Don't trust everything you read on the Internet"- Abraham Lincoln

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ebotrd
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Re: Section 179+bonus depreciation deduction Tesla Model X GVWR 6,000 landlords actively manage rental property Could it

Post by ebotrd » Sat Apr 07, 2018 11:55 pm

I'll keep reading for sure...consider myself pretty savvy as have done my own tax returns with our "mom and pop" rental property wrinkle for years on Schedule E, but find this topic a bit confusing - thus the appeal to the bogleheads hive mind :happy
When something is important enough, you do it even if the odds are not in your favor. -- E. Musk.

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Re: Section 179+bonus depreciation deduction Tesla Model X GVWR 6,000 landlords actively manage rental property Could it

Post by tibbitts » Sun Apr 08, 2018 9:31 am

You bought a Tesla primarily to take a 200 mile round trip twice a month? I'm not an expert but don't think anything changed relative to expensing your 2017 purchase - I think in recent years you've had similar choices for accounting for vehicle use.

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ebotrd
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Re: Section 179+bonus depreciation deduction Tesla Model X GVWR 6,000 landlords actively manage rental property Could it

Post by ebotrd » Sun Apr 08, 2018 2:29 pm

Well, yes, I suppose you could put it that way. It's a lot of driving - might as well enjoy it. And, yes, we're drinking the Tesla kool-aid. I don't think folks buy Teslas for reaons fully in line with the usual boglehead principles.
When something is important enough, you do it even if the odds are not in your favor. -- E. Musk.

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Re: Really?? "Hummer loophole" (Section 179+bonus depreciation deductions) for simple rental property biz?

Post by LadyGeek » Sun Apr 08, 2018 6:46 pm

ebotrd - You had a duplicate post, which I've removed. There were no replies.
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Re: Really?? "Hummer loophole" (Section 179+bonus depreciation deductions) for simple rental property biz?

Post by tmcc » Sun Apr 08, 2018 6:51 pm

qualification is a matter of interpretation sometimes. take the most aggressive, rational deduction possible, keep records and enjoy the road trips. worst case, you owe back taxes and some penalties.

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ebotrd
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Re: Really?? "Hummer loophole" (Section 179+bonus depreciation deductions) for simple rental property biz?

Post by ebotrd » Sun Apr 08, 2018 7:02 pm

Thanks - yeah I guess the "don't ask permissions, ask forgiveness" approach is best sometimes, but I'd like to find out all I can in advance.
As I think it through, our rental business only grosses about $50k/year annually, and after expenses we usually claim a few thousand $$ loss anyway, so I don't think this "loophole" could even benefit us in the first place.

BTW, all, I asked my CPA but he doesn't know. If this deduction did seem feasible we'd seek a CPA who knows about this sort of stuff.
Actually, my day job is plain W2, but I have done some moonlighting (can make $50k/yr extra if I want to work that much)...maybe I should incorporate for that and get another X ;)
When something is important enough, you do it even if the odds are not in your favor. -- E. Musk.

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Re: Really?? "Hummer loophole" (Section 179+bonus depreciation deductions) for simple rental property biz?

Post by tmcc » Sun Apr 08, 2018 7:19 pm

you can carry your losses forward.

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ebotrd
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Re: Really?? "Hummer loophole" (Section 179+bonus depreciation deductions) for simple rental property biz?

Post by ebotrd » Sun Apr 08, 2018 7:45 pm

Huh, I was doing more reading and I think you're right. I guess carrying forward wouldn't be much different that depreciating slowly the old fashioned way though(?) This article specifically mentions Sole Proprietorships like our rental property business is (and a lot of other "heavy SUV's that qualify):
https://www.marketwatch.com/story/heres ... 016-05-17
Still confused whether Schedule E depreciation for a rental property could apply as all my reading so far mentions only Schedule C business filers.
If you all think this may work in our case, I will find a CPA knowledgeable about it - sounds like the consulting/tax prep fee would likely be worth it (I've always been a DIY TurboTax guy except years we sold a house).
When something is important enough, you do it even if the odds are not in your favor. -- E. Musk.

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Re: Really?? "Hummer loophole" (Section 179+bonus depreciation deductions) for simple rental property biz?

Post by JBTX » Sun Apr 08, 2018 7:59 pm

I thought the hummer loophole related to vehicles over a certain weight? Not sure how a Tesla factors in here.

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ebotrd
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Re: Really?? "Hummer loophole" (Section 179+bonus depreciation deductions) for simple rental property biz?

Post by ebotrd » Sun Apr 08, 2018 8:38 pm

Our Model X (SUV) weighs over 6,000 pounds so by all accounts qualifies for this business deduction/depreciation scenario.
When something is important enough, you do it even if the odds are not in your favor. -- E. Musk.

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Re: Really?? "Hummer loophole" (Section 179+bonus depreciation deductions) for simple rental property biz?

Post by 123 » Sun Apr 08, 2018 8:56 pm

I am amazed at the inconvenience people will endure for the sake of a tax deduction. In my neighborhood there are a couple of households that have one of these super-sized trucks that qualify for these business tax deductions. They are usually unable to park them within our cul de sac due to their length at the curb and usually end up parking them on the through street a block away. Since they are often a second (or third) vehicle the household driveway/garage is already full with other vehicles. I have often seen the difficulty people have parking them shopping mall parking spaces. They look like they consume a lot of fuel. Maybe they're okay if you're "out in the country" but in an urban area they seem to be a pain.
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Re: Really?? "Hummer loophole" (Section 179+bonus depreciation deductions) for simple rental property biz?

Post by JBTX » Sun Apr 08, 2018 9:41 pm

123 wrote:
Sun Apr 08, 2018 8:56 pm
I am amazed at the inconvenience people will endure for the sake of a tax deduction. In my neighborhood there are a couple of households that have one of these super-sized trucks that qualify for these business tax deductions. They are usually unable to park them within our cul de sac due to their length at the curb and usually end up parking them on the through street a block away. Since they are often a second (or third) vehicle the household driveway/garage is already full with other vehicles. I have often seen the difficulty people have parking them shopping mall parking spaces. They look like they consume a lot of fuel. Maybe they're okay if you're "out in the country" but in an urban area they seem to be a pain.
+1 Welcome to my world in TX. Both DW and I drive sedans and you would think we are aliens.

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Re: Really?? "Hummer loophole" (Section 179+bonus depreciation deductions) for simple rental property biz?

Post by Bacchus01 » Sun Apr 08, 2018 9:52 pm

tmcc wrote:
Sun Apr 08, 2018 7:19 pm
you can carry your losses forward.
For how long?

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ebotrd
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Re: Really?? "Hummer loophole" (Section 179+bonus depreciation deductions) for simple rental property biz?

Post by ebotrd » Mon Apr 09, 2018 12:02 am

Correct me if I'm wrong, but I think carryover losses can be carried over indefinitely - once we pay off our mortgage in 9 years we may start to net some profit; or if/when we sell it'd increase the basis cost and thus decrease your taxable income from the sale (though we may also pass the rental on to our kids as inheritance).
Model X's are heavy, but they're actually fairly sleek as SUV's go.
When something is important enough, you do it even if the odds are not in your favor. -- E. Musk.

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