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Old 08-20-2018, 10:03 PM
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Trading in a section 179 vehicle in 3rd Year

Tax Gurus, I would like to ask your assistance on a section 179 question that has befuddled my accountant. I have a lot of faith in my accountant, however I think he is off on this, and he is not sure if he is or not.

I purchased a 2011 Mercedes sprinter van in 2014 which qualifies for the full 179 treatment because of the number of seats (12). It was in service at 75% business use from 05/20/2014 ? 11/16/2017. Purchase price was $37429, of which I claimed $28,072 on my 2014 taxes for my sole prop business.

On 11/16/2017 I traded it in for a 2016 Nissan NV3500 which also qualifies as 12 passengers. I was given $20,500 as a trade in credit on the Mercedes. The new vehicle is also 75% and the purchase price was $25,670. My accountant says he believes I can only take 75% of $5170, which is the purchase price of the new van minus the trade in value of the old.

I will gladly pay for this info or take any handout you would like to give. Any help is appreciated.



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Old 08-22-2018, 11:54 AM
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Tax Gurus, I would like to ask your assistance on a section 179 question that has befuddled my accountant. I have a lot of faith in my accountant, however I think he is off on this, and he is not sure if he is or not.========>>> you, as a taxpayer, can benefit from hiring a right tax accountant, and a lot do. However you need to take some simple steps to protect yourself before you spend your hard-earned cash on a tax prosuch as an IRS Enrolled Agent/a CPA. Please make sure you find the right accountant for your situation and that you ask certain questions; you'll want a tax pro who has experience dealing with tax situations similar to your own. For example, say, you're being audited, you don?t want someone who has never handled an audit before. Remember that you, not the accountant, are ultimately responsible for the information included on your tax return. Ask everyone you can think of for recommendations: family, friends, business owners, financial advisors, and attorneys. It can be particularly helpful to ask someone who has a tax situation that's similar to your own.

I purchased a 2011 Mercedes sprinter van in 2014 which qualifies for the full 179 treatment because of the number of seats (12). It was in service at 75% business use from 05/20/2014 ? 11/16/2017. Purchase price was $37429, of which I claimed $28,072 on my 2014 taxes for my sole prop business.======>>As you can see, for vans ,that are used more than 50% in a qualified business use, the total deduction including both the Section 179 expense deduction as well as Bonus Depreciation is limited to $11,160 for cars and $11,560 for vans. you can only claim Section 179 in the tax year that the van is ?placed in service? meaning when the van is ready and available ? even if you?re not using the van. Further, the van first used for personal purposes doesn?t qualify in a later year if its purpose changes to businessIf you take a Section 179 deduction on the full purchase price of the van, then, you will not have any additional vehicle depreciation. You must reduce your basis in the vanby the Section 179 deduction. By doing so, you will not have any basis for the van to depreciate in future years. As always, whenever, you have questions, consult your tax professional for exact rules regarding Section 179 and vehicles

On 11/16/2017 I traded it in for a 2016 Nissan NV3500 which also qualifies as 12 passengers. I was given $20,500 as a trade in credit on the Mercedes. The new vehicle is also 75% and the purchase price was $25,670. My accountant says he believes I can only take 75% of $5170, which is the purchase price of the new van minus the trade in value of the old.======>>Correct; The trade-in value of the old vehicle of $20,500 that was applied to reduce the overall purchase price of the new vehicle in 2017 f $25,670, must not be included when calculating amounts to determine section 179 deductions. Therefore, when figuring your allowable section 179 deduction you do not enter the total cost or purchase price of the new vehicle of $25670, you enter the cash paid or financed for the new vehicle. Your basis in the new car should be considered $5170 NOT $25670 since $20500k was from a trade in. Bonus depreciation is offered some years, and some years it isn?t. Right now in 2018, it?s being offered at 100%.
The most important difference is both new and used van qualify for the Section 179 Deduction ,as long as the used van is ?new to you, while Bonus Depreciation has only covered new equipment only until the most recent tax law passed. In a switch from recent years, the bonus depreciation now includes used van.When applying these provisions, Section 179 is generally taken first, followed by Bonus Depreciation unless the business had no taxable profit, because the unprofitable business is allowed to carry the loss forward to future years



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Old 08-24-2018, 12:36 PM
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Thanks for the comprehensive info. I am disappointed I cannot take more depreciation, above the $5170, but I guess that is fair.



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Old 08-24-2018, 01:32 PM
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Originally Posted by ishootfriendlies View Post
Thanks for the comprehensive info. I am disappointed I cannot take more depreciation, above the $5170, but I guess that is fair.
The depreciation deduction limits apply only to ?passenger automobiles.? That means vehicles with a gross unloaded weight of less than 6Kpounds. The gross loaded weight is the vehicle?s weight without any passengers or cargo.However, say trucks that weigh 14K pounds or less fully loaded are subject to the same rules as passenger automobiles unless the vehicle is not likely to be used for personal purposes. In that case, the vehicles are not considered passenger automobiles and the limitations on depreciation don?t apply.



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Old 08-24-2018, 02:03 PM
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Originally Posted by Wnhough View Post
Correct; The trade-in value of the old vehicle of $20,500 that was applied to reduce the overall purchase price of the new vehicle in 2017 f $25,670, must not be included when calculating amounts to determine section 179 deductions. Therefore, when figuring your allowable section 179 deduction you do not enter the total cost or purchase price of the new vehicle of $25670, you enter the cash paid or financed for the new vehicle. Your basis in the new car should be considered $5170 NOT $25670 since $20500k was from a trade in. Bonus depreciation is offered some years, and some years it isn?t. Right now in 2018, it?s being offered at 100%.s
Just what I was looking for, thanks.



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