July 16, 2024 • 31 mins
This episode of the Teaching Tax Flow podcast dives deep into the complexities of car and truck deductions for businesses. Joined by a seasoned tax professional, the discussion centers on the eligibility and nuances of vehicle expense deductions, explaining what they are and what they aren't.
In a detailed conversation with tax expert Shawn Flattery, listeners will learn who can claim vehicle expense deductions and the criteria involved. The episode explores the distinctions between standard mileage and actual expense deductions, the nuances of the 6000-pound vehicle rule, and the considerations between buying vs. leasing business vehicles. Through practical examples and a touch of humor, Shawn simplifies the complexities of tax laws, helping business owners make informed decisions that could lead to significant tax savings.
Key Takeaways:
- Eligibility Criteria: Only business owners can deduct vehicle expenses, and the vehicle must be used at least 50% of the time for business purposes.
- Standard Mileage vs. Actual Expense: Understand the difference between standard mileage rate deductions and actual vehicle expense deductions, and when to use each method.
- 6000-Pound Rule: Learn about the significant tax advantages for vehicles with a gross vehicle weight rating of over 6000 pounds and how this can affect your deductions.
- Buy vs. Lease Considerations: Get insights into the tax implications of buying versus leasing a business vehicle and which option might offer better tax benefits.
- Tax Credits for EVs: Discover the specific tax considerations for electric vehicles, including the impact of the $7,500 credit on depreciation limits.
Notable Quotes:
- "If you're using the vehicle for 50% or more for business, then we can start talking about depreciating and taking actual costs." - Shawn Flattery
- "It's really the date that it becomes available for business use is the magic day and year. Thus, that depreciation starts and you can start taking those deductions." - Shawn Flattery
- "A vehicle more than 6000 pounds...expands out how much depreciation you can take in the year." - Shawn Flattery
Episode Sponsor:
Strategic Associates, LLC
Roger Roundy
www.linkedin.com/in/roger-roundy-86887b23
- (00:04) - Understanding Car and Truck Deductions for Business Owners
- (04:34) - Tax Benefits of Business Vehicle Depreciation and Expense Deductions
- (14:27) - Tax Benefits of Vehicles Over 6000 Pounds
- (19:59) - Buy Versus Lease: Tax Benefits and Considerations
- (28:08) - Understanding Vehicle Tax Deductions and Misconceptions
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Intro (00:05):
Welcome to the Teaching Tax Flow podcast, where the goal
is to empower and educate you tolegally and ethically minimize
taxes paid over your lifetime.
John Tripolsky (00:17):
Hey, everybody, and welcome back to teaching tax
flow, the podcast. Onto episode92 today, we are gonna dive
directly into car and truckdeductions. That's right. We are
gonna explain what they are andwhat they aren't. But before
that, let's take a brief momentas always, and thank our episode
sponsor.
Ad Read (00:38):
This podcast is brought to you by Strategic Associates.
Are you a high income earner,real estate investor, or
successful entrepreneur who isfrustrated by having to pay
$75,000 or more of annual taxliability? If so, Strategic
Associates can help. Your firststep to saving 1,000, if not 100
of 1,000, is to contact RogerRoundy atroger@strategicag.net
(01:01):
or by calling 801-641-2956, andbe sure to tell them TTF sent
you.
John Tripolsky (01:10):
Alright, everybody. As you obviously read
in the show description becausewe know you read all those
descriptions word for word andunderstand them, and obviously,
you see the title, we're gonnatalk about those car and truck
deductions. So as again, youheard in the intro, we're gonna
talk a little bit about whatthey are and what they aren't.
So why I say that's important.Right?
(01:31):
I'm sure there's a lot of peopleout there, and I can say this
firsthand because I've heard it.And, you know, I was probably
one of them at one time too,thinking you could just deduct
everything that relates to yourvehicle. So we're talking
mileage, fuel, oil change, carwashes, window tint, window
stickers, vanity license plates,everything. It's not really the
(01:52):
case. So we brought out a goodguest today.
More importantly, let'srecognize the fact that Chris
Pacira was not here. So aseverybody knows, I've known that
guy for a long time. I can saywhatever I want to about him on
this one, and I don't even haveto edit it in or edit it out
because he's not here to defendhimself. So, anyways, back to
(02:14):
the topic. So Sean Flannery isactually joining us on this.
I've known Sean for a while.Great guy. We've done a done a
little bit of travel, bumpinginto each other, but more
importantly, he is an expert inthis area. So without further
ado, Sean, how's it going, man?How are you today?
Shawn Flattery (02:31):
Good. Thanks. Thanks for having me. Good
talking to you again, likealways.
So I guess we wanna talk about,vehicle depreciation or expense
and all that. Is that
John Tripolsky (02:43):
Yeah. Let's let's look at this. Right? So, I
mean, me being a gear head, I'mI'm thinking I'm like, man, how
can you deduct, you know,putting a big block Chevy in a
Miata or something? So we'rewe're we're gonna leave all my
random random ideas out of themix, but I'd probably say that
the best place to start withthis.
Right? So talk about who canactually deduct any vehicle
(03:05):
expenses. So it's not justanybody working a w two. Right?
This is more your self employedbusiness owners, etcetera.
Right? So kind of walk usthrough who can take those
deductions for 1, and thenreally just how a vehicle is
even reported at all when itcomes tax time. Right? So kinda
walk us through what a vehiclemeans to a tax pro.
Shawn Flattery (03:27):
Wow. So we we just really got it to the
exciting here.
John Tripolsky (03:30):
Oh, yeah. We jumped right into it.
Shawn Flattery (03:32):
Yeah.
John Tripolsky (03:32):
Yeah. I'm excited about this. Yeah.
Shawn Flattery (03:34):
So if we're talking vehicles now first off,
you gotta be a business owner ofsome sort. Right? Unfortunately,
congress has, removed anythingthat is for personal use of
vehicles. There's there's oneexception really out there.
There might be one other thatI'm not aware of, but it's for
the military.
They do have some someexceptions. But if you're not
(03:57):
military, you probably cannotdeduct your vehicle at all. Just
south straight, though. If youdo own a vehicle, now we're
talking maybe. And the the maybekinda goes into how much you use
it for your business and, whatit's what it's used for.
You're when you're looking at avehicle, the the key threshold
(04:20):
is 50% or more. If you're usingthe vehicle for 50% or more, for
business, then we can starttalking about depreciating and
taking actual costs. You'retalking about dropping an engine
in there. It's possible. You canwrite off a new engine on a a
business vehicle.
You can also write off I don'tknow. I'm not such a gear at.
(04:43):
Right? I just, you know, youwanna visualize my I'm a true
accountant. Right?
I'm sitting in my basement. Youknow, I haven't seen the sun in
days because that's just what wedo. So when I think of business
vehicles, I think of, like, acar fresher. You know, those
little, you know, like lookslike a little green tree. Yeah.
If it's truly a businessvehicle, a 100%, yeah, you can
(05:04):
probably write that off too. Soit's pretty much it just kinda
depends on whether you're usingthe vehicle enough to justify
actual, and that's wheredepreciation comes into play and
other expenses like dropping thenew engine in or my car
freshener. Or if we're talking,hey, this vehicle is
John Tripolsky (05:24):
not used enough. So under 50% use and or just a
cheap vehicle that you wanna usestandard mileage. And with
standard mileage, right, so nowwe're at, what, 64, 67¢ per
mile?
Shawn Flattery (05:39):
Oh, it amped up. It inked up. We're now at a
grand total of 67¢ a mile in2020.
John Tripolsky (05:47):
And it was just in the if I remember right, it
was not too too long ago. Right?It was, like, 58 or something.
So I feel like recently it kindajumped.
Shawn Flattery (05:56):
Like everything, prices have gone up. So Kager
says slowly bumped up the, thecents per month.
John Tripolsky (06:03):
Hey. At least they did that. Right? And that
Yeah. And then
Shawn Flattery (06:05):
And Sean,
John Tripolsky (06:06):
this is actually so I've I've heard this multiple
times in conversations with, youknow, people that may have just
been getting into business or,you know, not to not to go off
the deep end on people thatthink deduction means free for
something like, oh, you know,it's a it's a business expense.
It's free. Well, we know that'snot the case. But say say
(06:27):
somebody's going out. They'relike, alright.
Listen. I need a vehicle. We'regonna assume that we'll just say
it's a 100% of your business.Say it's a, I don't know, a
fleet vehicle or something. Sothere's no there's no chance
that it would not qualify forfor business use.
So if they're going out when,you know, we can get into lease
lease and buy if we want to alittle bit later on. But if
(06:50):
somebody goes out and theypurchased the vehicle, we'll
call it $110,000. They go outand they they buy it. Say they
don't even finance it. Say theypaid cash for this thing.
Great. It's an expense. Thevehicle's registered with them.
At that point, they've chosen toactually take the expense as the
deduction. So taking mileagedeductions beyond that, is that
(07:13):
still the case?
Can they still take mileage, oris it if and or how does that
situation?
Shawn Flattery (07:20):
Yeah. We we we you can't do both. So this is
kind of a one or the other. Inany given year, you either take
standard or mileage. Now it ispossible to switch it where if
in your 1st year, you use, Ibelieve it's, actual expensing,
(07:41):
you can, the following year,switch over to standard mileage.
But in my my time filing taxesfor 10 plus years is either it's
a either it's all indepreciation, actual cost is a
better way to go, or mileage. Idon't know if they sell. Yeah.
(08:01):
Like like, they don't sellanymore, but if you go off and
find yourself a Pinto or aGremlin out there yeah, those
vehicles are probably prettycheap, under 20,000. Maybe not.
Maybe they're a collector. Idon't know. I don't know. But
under 20,000, you might bebetter off doing standard
mileage regardless of use.
John Tripolsky (08:20):
But if you're talking
Shawn Flattery (08:21):
a 50, 60, and that's actually a cheap vehicle
now. Right? You're trying to buya truck. That's gonna be easily
a
John Tripolsky (08:27):
$100,000. There's no way that standard
mileage is a way to go just inrunning that thing every year.
You're gonna wanna do that. Andthen either, you know, either
whichever route somebody goes.Right?
Obviously, maintenance again,making the assumption that it's
strictly for business. All themaintenance costs, fuel costs,
(08:49):
and really everything around itkinda roll in together. Right?
Except
Shawn Flattery (08:53):
Yeah. So the common thing is that you'd run
across your your gas and oil,your maintenance. Hey, John and
t, you were just talking aboutyou you dropped me into. Maybe
maybe you got that fleetvehicle. It's a it's not a
$60,000 vehicle.
It's a $200,000 fleet vehicle.And that engine, yeah, it's
gonna cost you $60, but it'scheaper than a brand new
(09:16):
vehicle. So you can drop thatengine in and start depreciating
that, or if it's a smallerprice, expensive. Tires,
registration, license, interest,if you got a loan, inch
insurance, and, parking fees,tolls. If it if it goes into
running the vehicle, keep itgoing.
Hey. My car fresher. Right?Updated mats on the vehicle.
(09:41):
Those are all expensive.
John Tripolsky (09:42):
Because we know you like, you know, because
we'll say cotton candy flavoredcar fresheners and, you know,
pink and purple and glitteryfloor mats. So you have to have
those in your in your vehicle.
Shawn Flattery (09:54):
It's weird to be. I got a I got a 5 year old
daughter and pretty mucheverything I own at this point
is got some pink and glitter onit all over.
John Tripolsky (10:01):
Yeah. Hey. I know how it is, man. In the most
random places, sometimessometimes, you know, you're
gonna take a pair of shorts or,you know, pants out of the
dryer. You're like, how thatain't mine.
How did that get in my pocket?Yeah. It's like It just
Shawn Flattery (10:13):
blew up in the dryer, and you have no idea
where it came. Yeah.
John Tripolsky (10:17):
And then if you look at them and be like, come
on. You're 3 years old. Youdon't know this? Of course, you
don't. You're 3 years old.
So here's actually anotherquestion then too, maybe. As bad
as it is, I should know theanswer to this one, but I don't.
Right? So say you take mileageinstead of standard on a
vehicle. Can you still write offfuel costs though too?
(10:38):
Or does that standard mileagekind of equate for fuel and not
maintenance or repairs, butyeah.
Shawn Flattery (10:47):
But that's that's actually a great
question. I hear thisconstantly.
John Tripolsky (10:51):
But I'm glad it's a good one and not a dumb
one because I felt kinda dumbasking it. Oh. Oh, definitely
not. Yeah.
Shawn Flattery (10:57):
I see. Now so if you're doing standard mileage
inside of that for 2024, the 67¢per mile is includes the cost
of, your gas, your insurance,the the cost of the vehicle
itself. They've kind of put itall in as into this one number.
(11:18):
And the idea is if you drive avehicle per mile, this is your
cost of running it. Again, likeI said before, a very cheap
vehicle.
Yeah, this this not only isprobably more than your cost per
mile, but or equal to, butprobably more. A more expensive
vehicle, your cost of driving itis probably more than that 67¢ a
(11:42):
mile, which is gosh, man. I'mI'm a little old, man. I
remember when gas is under adollar gallon. Man, I
John Tripolsky (11:50):
I remember leasing a fully loaded Dodge Ram
back in the day for it was $99 amonth or was $2,450 prepay for 2
years lease. Now it's like
Shawn Flattery (12:05):
We we just gotta get banning my day. We bought a
house for 5 grand.
John Tripolsky (12:10):
Right. But interest rates, you know, they
were at 16 and a half percent.So, Sean, here's so that thank
you so much, by the way, forexplaining that because I,
again, I I hear that so oftenthat it's almost now I just
kinda tune out. Right?Especially going to, you know,
in the marketing world here.
I remember going to tons ofconferences and just hearing
(12:33):
people's way of describing this.It's like, get out of here. So
really, if you're smart and andyou I shouldn't say don't care
what you people think you drive,but, you know, the whole beater
with a heater mentality we usedto say up here in Michigan. It's
like, go get the cheapest carpossible that gets you from a to
b hopefully or at least almostall the way to b, has a heater
in it, and then take themileage, and you're actually
(12:55):
making some. Like, you're you'reway better off.
You would actually get
Shawn Flattery (13:00):
you know, you might not get more than what you
can, put into it, but it's realpossible for you to get a much
higher per, you know, percentageback. You know? If if you wanna
round it out now, this isn't allin 1 year because they limit how
much depreciation is in anygiven year. Even if you use
bonus 179, normal maker'sdepreciation, little taxi on you
(13:22):
there. I'm sorry.
But you got a vehicle for a100,000. Your your tax savings
and thus money back in yourpocket indirectly is gonna be
depending on your income isusually gonna fall somewhere
that 30% range. So even thoughyou bought a vehicle for a
100,000, your out
John Tripolsky (13:42):
of pocket cost is still gonna be 70. Makes
sense. And let's actually talkabout something too, and and I
know we've discussed this very,very briefly at a few podcasts.
Previous ones, there's been somecontent we put out there around
this. So let's talk about the6,000 pound
Shawn Flattery (14:00):
rule.
John Tripolsky (14:01):
So this this is a fun one to me. Right? Because
sometimes you look at you lookat all these vehicles on the
road, and you go like, listen,man. You do not need a Suburban,
or you do not need a fullyloaded full size diesel pickup
truck for what you do. Butthere's a lot of tax benefits to
(14:22):
that.
Right? Including, I think, themost interesting example of
this. I I could not remember forthe life of me if it was Land
Rover or it might have beenMercedes with the G WAG. I don't
remember what which one it was,but they had advertised it was
either a Business Insider,Forbes, or somewhere, but it was
a full page ad. I do rememberthat.
And it specifically talkedabout, the vehicle gross gross
(14:46):
vehicle weight being over £6,000and, you know, how this is
perfect for business owners. Soto me, I mean, this was years
back. It it kinda blew my mind alittle bit. Like, why in the
world is is this here? Andreally didn't talk a whole lot
about price, which I think waspretty smart, you know, from
those marketing and advertisingfolks.
But let's talk about that. Whyin the world does a vehicle that
(15:08):
weighs £6,000 or more, why isthat different from driving
around, you know, the, theexplosive, Pintos back in the
day. So I don't even know howmuch those were. Those weighed,
but they weren't much. And ifany I mean, every most people
know what a pintos was.
But
Shawn Flattery (15:27):
Yeah. Yeah. They they might have been a lot
because it was all steel backthen. But, yeah, if if you're
talking a £6,000 vehicle ormore, right, it's it's really
6000 to 14,000 that which ispretty much any vehicle outside
of very large constructionspecific vehicles. Once you're
(15:47):
over that 6,000 gross vehicleweight rating, now that expands
out how much depreciation youcan take in the year.
They really, really limit you toa a sub $6,000 vehicle is gonna
be limited to, like, 12,400 indepreciation. That's it. There's
nothing more. If, if you haveyour if if you have a vehicle
(16:09):
more than £6,000, you can nowtake bonus once of add
depreciation that can, eat upmost of the vehicle's costs.
You're still limited in totaldepreciation for any given year,
but it's much higher.
John Tripolsky (16:24):
And then so that's 6,000. Right? So that's
back to the example. Right?Like, you look at some people
and you're like, why do you needthat?
But either they really likelarge vehicles, they might have
a lot of employees, equipmentthey're hauling around, or they
are knowledgeable when it comesto this because there's no
limitation saying it has to be acertain type of business. Right?
(16:47):
It's just general and
Shawn Flattery (16:48):
Yeah. Yeah. And you you pointed out a couple of
big vehicles. Right? This isn'tthe weight of the vehicle.
It's it's a little bitdifferent. So it's a gross
vehicle weight rating. So thisis kind of a special, like,
maximum rating that this vehiclecould get in holding weight. And
(17:11):
so you might be looking at asmaller vehicle like a Mercedes
vehicle that it it's actuallyluxury they call it luxury
vehicle limitations. You youwould think of Mercedes as a
luxury vehicle.
Right? A bunch of theirvehicles, just barely, like,
6,100, 6,150 are right abovethat gross vehicle weight
(17:33):
rating, even though you'relooking at it going, that's a
small relatively small vehicle,its actual weight is £4,000 or
something because they gottakeep my the mileage per gallon
low, but they they get that GVRup above the 6,000 so you can
depreciate it. And, of course,then the marketers go to play,
and they start bragging aboutit.
John Tripolsky (17:54):
Right. We we're really good at twisting words.
Right? It's focusing on thebenefits. Exactly.
Of course. If if any marketersout there who twisted for the
negative, they're probably notin the you know, they might be
in politics or to leave thatalone. They but any anyhoo but
yeah. I mean, I I found it veryinteresting. Right?
(18:16):
So and really, Shout, like, whywhat might be the reason again
that they they really did that?Like, is it more, like, they
offer that £6,000? Is it toentice, you know Well one
purchase or another? Or what'sthe
Shawn Flattery (18:31):
The answer is it It's somewhere in a holistic
cause for and there's neverholistic with congress. The a
cause of allowing for realbusiness vehicles to, get the
full deduction, but also justcongress being congress. And
whatever side that you're on,you can probably agree that it's
(18:53):
it doesn't make a lot of sense.It is definitely a driver,
though, of why vehicles areheavier because fleets,
vehicles, if you go and get an f150 and compare it to a vehicle,
an f 150 in the nineties or theeighties, seventies, they were a
lot smaller than they are today.And part of that is because of
(19:13):
this, taxes.
Makes sense. Makes sense. Sothere and anybody too, if
John Tripolsky (19:18):
you have any specific questions to, for our
listeners on the 6,000 poundrule or any of this, as always,
reach out to us. Obviously,there's defeating taxes, the
private Facebook group, ping inthere. We got a lot of
information. But, Sean, before Ilet you go here, so let's talk
about one more thing that I knowI I know for a fact people have
had this question because we'vebeen asked this question. And
(19:41):
it's really buy versus leasetoo.
So maybe, you know, what whatwould be the benefits with each?
Obviously, I think everybodyknows what a buy is and what a
lease is. So I we don't need toexplain what that is
necessarily, but maybe give us acouple examples where one may
work better than the other.Maybe some things to watch out
for where you could think you'regetting a better deal, but
(20:05):
you're losing on a huge taxbenefit. Kinda walk us through
your your perspective of that,you know, being a tax pro.
Shawn Flattery (20:11):
Well, being a tax guy and, kind of concerned
on spending cash, I tend toavoid leasing, but there are
various reasons. Whether it'scash flow, maybe you don't
necessarily know if you needthis type of vehicle. You don't
wanna take ownership where leasedoes make sense. And, heck,
sometimes you just get a greatdeal on leasing. It this
(20:31):
happens.
From a tax perspective, it doeschange your options. When with
purchasing the vehicle, you youget the the depending on how
much you use it for, the betterof mileage or actual costs. And
that includes all all of thecosts of running it. But for
(20:53):
lease, you're you're morelimited to you don't get that
depreciation. Right?
You don't own that vehicle. Soall you can write off is the
monthly payment that you haveplus the cost of operating. So
if you have a a $500 a monthlease, then you're looking at a
$6,000 a year lease cost plusyour mileage, insurance, and all
(21:16):
the other things. Or you can dothat mileage. Same, same thing
as a 67¢ per mile.
It it really so it some of
John Tripolsky (21:24):
it may boil down to simply to somebody like
getting a new vehicle every 2years and not having
Shawn Flattery (21:28):
to worry about, you know, for however long.
Yeah. Yeah. Yeah. For sure.
Like, I I drive mine tillthey're they're rust bucketed
out. But some might like them.Yeah. Brand new shiny vehicle
every year. So that's that fromthat perspective, I try to like
any vehicle, hey.
(21:49):
They come to me, hey. Should Ibuy a vehicle? You know, from a
tax perspective, it might makesense. You might get a benefit
from them, but I'd never suggestbuying a vehicle just for tax
purposes. It's gotta make sensefor you economically and from a
cash flow perspective.
So if you're looking to buy that$100,000 truck, but you don't
(22:11):
need a truck, and you don't havethe cash flow for the truck, the
tax savings isn't gonna outweighthe cost. And the car salesman
out there hating us for sayingthis because they were open on
their Christmas bonus.
John Tripolsky (22:24):
You know, they get everybody, you know, the the
week before the end of the yearthat's in there trying to buy
vehicles. And I'm sure so oh, sohere's another dumb question I
just thought about this too. So,for example, right, so a lot a
lot of my friends are in theconstruction space. So they all
went out and bought it. They buynew trucks all the time for some
reason.
Who knows? And and you're right.Some of them are, you know, darn
(22:46):
near a 150,000. So some of themwent. They bought vehicles.
So we'll say during the coveduring COVID time. Right?
They're buying these vehicles,but some of them waited almost a
year and a half to get it. So Iimagine it's that point of
registration that you couldstart any deductions on any of
that. Right?
(23:06):
It can't be like, oh, I I putdown a 50% cash deposit or I
paid for an up I don't knowanybody pays for 1 up front if
Shawn Flattery (23:13):
you were it. But would it have
John Tripolsky (23:15):
to be a point of delivery?
Shawn Flattery (23:17):
Yeah. It it would be a boy like, point
delivery or registration isn'tquite it. You could own a
vehicle for 5 years and thenplace it in service and then
start depreciating the vehicle.It's really the point of when
it's actually available forbusiness use. So whether you're
waiting a year and a half forthat vehicle to show up so then
(23:38):
you can use it for business, oryou've been sitting in your
personal use for years, and nowall of a sudden you're using it
for business.
Same thing. It's the date thatit becomes available for
business use is the magic dayand year thus that depreciation
starts, and you
John Tripolsky (23:56):
can start taking those deductions. Makes sense.
I'm scraping the barrel for themost random questions I can
think of to ask you. So Well, I
Shawn Flattery (24:04):
I tried. I tried. Maybe you didn't realize
it, thought of it. Like, thatend of year purchase. Right?
You're going to buy a vehicle.It's coming in at the 31st, last
couple days of the year. That Imean, from a regular normal,
like, 5 year depreciation, whichis that maker's kind of as slow
(24:25):
as you can make it depreciation,that's gonna be really low.
Right? But the accelerateddepreciation, like 179 or bonus,
those still apply just as if youhad bought it on January 1st.
John Tripolsky (24:37):
Makes sense. Makes sense. It's all So
Shawn Flattery (24:39):
you can get it. If you're really trying to time
things out, you might get a taxbenefit and even a cash refund
if you file your return earlyenough before your first
payments are coming in for thatbrand new vehicle you got on
December 31st.
John Tripolsky (24:52):
And not to even get into EVs because I know me
and, me and Chris had adiscussion on this couple months
back. But I know, like, leasing,for example, with that just
kinda recap what we spoke abouta while ago. I know with EVs.
Right? So say you lease anelectric vehicle.
You're you're really opting outof being able to take any of the
(25:13):
personal credits, deductions,whatever they're offering for
EVs because the vehicle isreally not yours. It's the
dealership. So the manufacturer,I believe, is the ones that's
taken those rebates if you werethe federal tax credits or
anything through that. But,obviously, if you purchase it,
that's a that's a differentdeal. So I think they weigh that
into the the least pricesusually, and it's outlined in
(25:36):
all their marketing andadvertising, but there's always
credits around it too.
So I think there's the, there'sa used vehicle one.
Shawn Flattery (25:43):
Yeah. Yeah. So that that's pretty much you
you're you're pretty much nailedin it. If you're leasing an
electric vehicle, there's that7,000 up to $7,500 energy credit
tax credit for an EV vehicle. Hegoes to the owner of the
vehicle.
So if you're leasing thevehicle, then you're leasing it
from someone else. Could be thedealer. Could be, could be Tesla
(26:05):
directly. Either way, whoeverowns that vehicle that's it's
being leased from gets thatcredit. I have seen quite often
where that credit is thenbasically applied towards the
cost of the lease.
So you still get it indirectly,but you don't get to put it on
your tax return.
John Tripolsky (26:24):
If anything, I'm sure they kinda take it into
account when they come up withthe I, the depreciated value at
the end of the lease because weall know yeah. Yeah. We'll we'll
leave EVs out out of it a littlebit. That's a it's a whole
another discussion. I thinkeither side of the fence,
somebody especially being inDetroit.
Right. So up here, people eitherlove them or you hate them.
There's very few people that arekind of in the middle. We don't
(26:46):
wanna we don't wanna piss off50% of our audience.
Shawn Flattery (26:49):
Yeah. Yeah. The the only thing I would wanna add
on the EVs just to watch out,there's a sometimes overlooked,
unique thing about the EVs andthat tax credit. If you were to
buy a EV, and we'll we'll usethat. What were you saying?
A $60,000 truck. If you were ifyou were to buy an EV for
(27:09):
$60,000 and then get that $7,500credit, you can depreciate the
full 60,000. You have to takethe cost of your vehicle, 60,000
less the credit of 7,500 ifthat's what you get. Mhmm. So
then your depreciation that youcan take is 52,500 over the the
(27:35):
the life of that vehicle'sdepreciation.
That's a great point. Greatpoint. That that that was
tricky. Even, when I'm workingwith my team who works just
taxes year round, they'll missthat. It's an easily overlooked
difference for EVs.
John Tripolsky (27:51):
I'm sure it's buried somewhere in the IRS
publication that is about a milesick, and, you know, you'd have
to kill a 1500 trees just toprint that thing. So yeah. I
mean, of course, you guys knowevery single page of that. The
right? Of course.
How dare you miss anything?
Shawn Flattery (28:08):
It's why we're reading material every night to
go
John Tripolsky (28:10):
to bed. Yeah. Makes sense. Makes sense. But
speaking of going to bed of andand the pink and purple floor
mats, of course,
Shawn Flattery (28:21):
like a pillow.
John Tripolsky (28:22):
But, yeah, speaking of going to bed,
hopefully, this topic didn't putanybody to sleep. Actually, I'm
I'm sure it didn't because if itdid, you probably just turn it
off. But I'm glad we touched onthis again, kind of as I alluded
to at the beginning. There's alot of confusion around this,
and I wouldn't I wouldn'tnecessarily put it in the bucket
of ignorance in a bad sense.It's just I think it's sometimes
(28:43):
when people think of, right,going into business for
themselves, you know, the whole,entrepreneurship is all glitz
and glamour, pink and purplefloor mats and, you know,
glitter.
It's not. So not everything isfree. There are some
complications when it comes todeductions and and write offs
and all this stuff and whatexpenses qualify for what. And
(29:05):
this I this I would say isprobably, in my opinion, from
what I see again, one of themost probably misused,
unintentionally misunderstoodones from the taxpayer side. So
thanks for diving into it, Sean.
I know I know I appreciate it,and hopefully our listeners do
too. So we'll have to have youback on here. Maybe we'll do a
(29:26):
car and truck 2.0 eventually.
Shawn Flattery (29:29):
Yeah. I'm sure there'll be some follow ups.
Yeah. They they did make, likeall tax laws, they tried to make
this clear to the mud. And andthis one just has its own unique
things, and it's not a commonquestion or concern, within the
clients I've worked with overthe years.
And, of course, when someonefinds out that I do taxes for a
(29:49):
living hey. Dinner. Well, I gota tax question about my vehicle.
Yep. Of course.
John Tripolsky (29:56):
Always. Always. But awesome, buddy. Well, I
well, I appreciate you joiningus back up here again on the
podcast. I know you listen toit, which is always great.
And I should have quizzed you onprevious episodes to see which
ones you actually did listen to.But, you know, I won't, I won't
harass you too. Thank goodness.I can't even remember all the
ones we've been. So Yeah.
Shawn Flattery (30:16):
The memory
John Tripolsky (30:17):
yeah. I have the memory of the field mouse, man.
Shawn Flattery (30:19):
I don't remember what happened yesterday.
John Tripolsky (30:21):
But you know the tax pump. That's the important
part. We don't care about whatyou did yesterday. Yeah. Nobody
else cares about you.
Alright. So well, thank you somuch, my man. We appreciate it
as always. And, again, as Imentioned a little bit earlier
on too, any questions on thistopic, please, please, please
feel free to reach out to ushere at teaching tax flow. You
(30:42):
should just email at hello atteaching tax flow dot com.
Go on our Facebook page atdefeating taxes is that private
Facebook group, growing likewildfire. And literally, we make
it as easy as possible unlikecongress and the IRS do for
taxpayers. Go to defeatingtaxes.com. It sends it straight
to that Facebook page. So Idon't have to give you the long
(31:03):
URL.
Tell you to click here, clickthere, spin around twice tapping
your forehead, and then you'rein. It's that easy. There's no
excuse. That's your private end.As always, we will see everybody
back here on the podcast nextweek, different topic, roughly
the same time.
See you soon.
Disclaimer (31:24):
The content provided is for educational purposes
only. We encourage you to seekpersonalized investment advice
from your financialprofessional. For all tax and
legal advice, please consultyour CPA or attorney. Investment
advisory services are offeredthrough cabin advisors, a
registered investment adviser.Securities are offered through
Cabin Securities, a registeredbroker dealer.
The content of this podcast doesnot constitute an offer of
(31:46):
securities. Offerings can onlybe made through an offering
memorandum, and you shouldcarefully examine the risk
factors and other informationcontained in the memorandum.
Welcome to the Teaching Tax Flow podcast, where the goal
is to empower and educate you tolegally and ethically minimize
taxes paid over your lifetime.
John Tripolsky (00:17):
Hey, everybody, and welcome back to teaching tax
flow, the podcast. Onto episode92 today, we are gonna dive
directly into car and truckdeductions. That's right. We are
gonna explain what they are andwhat they aren't. But before
that, let's take a brief momentas always, and thank our episode
sponsor.
Ad Read (00:38):
This podcast is brought to you by Strategic Associates.
Are you a high income earner,real estate investor, or
successful entrepreneur who isfrustrated by having to pay
$75,000 or more of annual taxliability? If so, Strategic
Associates can help. Your firststep to saving 1,000, if not 100
of 1,000, is to contact RogerRoundy atroger@strategicag.net
(01:01):
or by calling 801-641-2956, andbe sure to tell them TTF sent
you.
John Tripolsky (01:10):
Alright, everybody. As you obviously read
in the show description becausewe know you read all those
descriptions word for word andunderstand them, and obviously,
you see the title, we're gonnatalk about those car and truck
deductions. So as again, youheard in the intro, we're gonna
talk a little bit about whatthey are and what they aren't.
So why I say that's important.Right?
(01:31):
I'm sure there's a lot of peopleout there, and I can say this
firsthand because I've heard it.And, you know, I was probably
one of them at one time too,thinking you could just deduct
everything that relates to yourvehicle. So we're talking
mileage, fuel, oil change, carwashes, window tint, window
stickers, vanity license plates,everything. It's not really the
(01:52):
case. So we brought out a goodguest today.
More importantly, let'srecognize the fact that Chris
Pacira was not here. So aseverybody knows, I've known that
guy for a long time. I can saywhatever I want to about him on
this one, and I don't even haveto edit it in or edit it out
because he's not here to defendhimself. So, anyways, back to
(02:14):
the topic. So Sean Flannery isactually joining us on this.
I've known Sean for a while.Great guy. We've done a done a
little bit of travel, bumpinginto each other, but more
importantly, he is an expert inthis area. So without further
ado, Sean, how's it going, man?How are you today?
Shawn Flattery (02:31):
Good. Thanks. Thanks for having me. Good
talking to you again, likealways.
So I guess we wanna talk about,vehicle depreciation or expense
and all that. Is that
John Tripolsky (02:43):
Yeah. Let's let's look at this. Right? So, I
mean, me being a gear head, I'mI'm thinking I'm like, man, how
can you deduct, you know,putting a big block Chevy in a
Miata or something? So we'rewe're we're gonna leave all my
random random ideas out of themix, but I'd probably say that
the best place to start withthis.
Right? So talk about who canactually deduct any vehicle
(03:05):
expenses. So it's not justanybody working a w two. Right?
This is more your self employedbusiness owners, etcetera.
Right? So kind of walk usthrough who can take those
deductions for 1, and thenreally just how a vehicle is
even reported at all when itcomes tax time. Right? So kinda
walk us through what a vehiclemeans to a tax pro.
Shawn Flattery (03:27):
Wow. So we we just really got it to the
exciting here.
John Tripolsky (03:30):
Oh, yeah. We jumped right into it.
Shawn Flattery (03:32):
Yeah.
John Tripolsky (03:32):
Yeah. I'm excited about this. Yeah.
Shawn Flattery (03:34):
So if we're talking vehicles now first off,
you gotta be a business owner ofsome sort. Right? Unfortunately,
congress has, removed anythingthat is for personal use of
vehicles. There's there's oneexception really out there.
There might be one other thatI'm not aware of, but it's for
the military.
They do have some someexceptions. But if you're not
(03:57):
military, you probably cannotdeduct your vehicle at all. Just
south straight, though. If youdo own a vehicle, now we're
talking maybe. And the the maybekinda goes into how much you use
it for your business and, whatit's what it's used for.
You're when you're looking at avehicle, the the key threshold
(04:20):
is 50% or more. If you're usingthe vehicle for 50% or more, for
business, then we can starttalking about depreciating and
taking actual costs. You'retalking about dropping an engine
in there. It's possible. You canwrite off a new engine on a a
business vehicle.
You can also write off I don'tknow. I'm not such a gear at.
(04:43):
Right? I just, you know, youwanna visualize my I'm a true
accountant. Right?
I'm sitting in my basement. Youknow, I haven't seen the sun in
days because that's just what wedo. So when I think of business
vehicles, I think of, like, acar fresher. You know, those
little, you know, like lookslike a little green tree. Yeah.
If it's truly a businessvehicle, a 100%, yeah, you can
(05:04):
probably write that off too. Soit's pretty much it just kinda
depends on whether you're usingthe vehicle enough to justify
actual, and that's wheredepreciation comes into play and
other expenses like dropping thenew engine in or my car
freshener. Or if we're talking,hey, this vehicle is
John Tripolsky (05:24):
not used enough. So under 50% use and or just a
cheap vehicle that you wanna usestandard mileage. And with
standard mileage, right, so nowwe're at, what, 64, 67¢ per
mile?
Shawn Flattery (05:39):
Oh, it amped up. It inked up. We're now at a
grand total of 67¢ a mile in2020.
John Tripolsky (05:47):
And it was just in the if I remember right, it
was not too too long ago. Right?It was, like, 58 or something.
So I feel like recently it kindajumped.
Shawn Flattery (05:56):
Like everything, prices have gone up. So Kager
says slowly bumped up the, thecents per month.
John Tripolsky (06:03):
Hey. At least they did that. Right? And that
Yeah. And then
Shawn Flattery (06:05):
And Sean,
John Tripolsky (06:06):
this is actually so I've I've heard this multiple
times in conversations with, youknow, people that may have just
been getting into business or,you know, not to not to go off
the deep end on people thatthink deduction means free for
something like, oh, you know,it's a it's a business expense.
It's free. Well, we know that'snot the case. But say say
(06:27):
somebody's going out. They'relike, alright.
Listen. I need a vehicle. We'regonna assume that we'll just say
it's a 100% of your business.Say it's a, I don't know, a
fleet vehicle or something. Sothere's no there's no chance
that it would not qualify forfor business use.
So if they're going out when,you know, we can get into lease
lease and buy if we want to alittle bit later on. But if
(06:50):
somebody goes out and theypurchased the vehicle, we'll
call it $110,000. They go outand they they buy it. Say they
don't even finance it. Say theypaid cash for this thing.
Great. It's an expense. Thevehicle's registered with them.
At that point, they've chosen toactually take the expense as the
deduction. So taking mileagedeductions beyond that, is that
(07:13):
still the case?
Can they still take mileage, oris it if and or how does that
situation?
Shawn Flattery (07:20):
Yeah. We we we you can't do both. So this is
kind of a one or the other. Inany given year, you either take
standard or mileage. Now it ispossible to switch it where if
in your 1st year, you use, Ibelieve it's, actual expensing,
(07:41):
you can, the following year,switch over to standard mileage.
But in my my time filing taxesfor 10 plus years is either it's
a either it's all indepreciation, actual cost is a
better way to go, or mileage. Idon't know if they sell. Yeah.
(08:01):
Like like, they don't sellanymore, but if you go off and
find yourself a Pinto or aGremlin out there yeah, those
vehicles are probably prettycheap, under 20,000. Maybe not.
Maybe they're a collector. Idon't know. I don't know. But
under 20,000, you might bebetter off doing standard
mileage regardless of use.
John Tripolsky (08:20):
But if you're talking
Shawn Flattery (08:21):
a 50, 60, and that's actually a cheap vehicle
now. Right? You're trying to buya truck. That's gonna be easily
a
John Tripolsky (08:27):
$100,000. There's no way that standard
mileage is a way to go just inrunning that thing every year.
You're gonna wanna do that. Andthen either, you know, either
whichever route somebody goes.Right?
Obviously, maintenance again,making the assumption that it's
strictly for business. All themaintenance costs, fuel costs,
(08:49):
and really everything around itkinda roll in together. Right?
Except
Shawn Flattery (08:53):
Yeah. So the common thing is that you'd run
across your your gas and oil,your maintenance. Hey, John and
t, you were just talking aboutyou you dropped me into. Maybe
maybe you got that fleetvehicle. It's a it's not a
$60,000 vehicle.
It's a $200,000 fleet vehicle.And that engine, yeah, it's
gonna cost you $60, but it'scheaper than a brand new
(09:16):
vehicle. So you can drop thatengine in and start depreciating
that, or if it's a smallerprice, expensive. Tires,
registration, license, interest,if you got a loan, inch
insurance, and, parking fees,tolls. If it if it goes into
running the vehicle, keep itgoing.
Hey. My car fresher. Right?Updated mats on the vehicle.
(09:41):
Those are all expensive.
John Tripolsky (09:42):
Because we know you like, you know, because
we'll say cotton candy flavoredcar fresheners and, you know,
pink and purple and glitteryfloor mats. So you have to have
those in your in your vehicle.
Shawn Flattery (09:54):
It's weird to be. I got a I got a 5 year old
daughter and pretty mucheverything I own at this point
is got some pink and glitter onit all over.
John Tripolsky (10:01):
Yeah. Hey. I know how it is, man. In the most
random places, sometimessometimes, you know, you're
gonna take a pair of shorts or,you know, pants out of the
dryer. You're like, how thatain't mine.
How did that get in my pocket?Yeah. It's like It just
Shawn Flattery (10:13):
blew up in the dryer, and you have no idea
where it came. Yeah.
John Tripolsky (10:17):
And then if you look at them and be like, come
on. You're 3 years old. Youdon't know this? Of course, you
don't. You're 3 years old.
So here's actually anotherquestion then too, maybe. As bad
as it is, I should know theanswer to this one, but I don't.
Right? So say you take mileageinstead of standard on a
vehicle. Can you still write offfuel costs though too?
(10:38):
Or does that standard mileagekind of equate for fuel and not
maintenance or repairs, butyeah.
Shawn Flattery (10:47):
But that's that's actually a great
question. I hear thisconstantly.
John Tripolsky (10:51):
But I'm glad it's a good one and not a dumb
one because I felt kinda dumbasking it. Oh. Oh, definitely
not. Yeah.
Shawn Flattery (10:57):
I see. Now so if you're doing standard mileage
inside of that for 2024, the 67¢per mile is includes the cost
of, your gas, your insurance,the the cost of the vehicle
itself. They've kind of put itall in as into this one number.
(11:18):
And the idea is if you drive avehicle per mile, this is your
cost of running it. Again, likeI said before, a very cheap
vehicle.
Yeah, this this not only isprobably more than your cost per
mile, but or equal to, butprobably more. A more expensive
vehicle, your cost of driving itis probably more than that 67¢ a
(11:42):
mile, which is gosh, man. I'mI'm a little old, man. I
remember when gas is under adollar gallon. Man, I
John Tripolsky (11:50):
I remember leasing a fully loaded Dodge Ram
back in the day for it was $99 amonth or was $2,450 prepay for 2
years lease. Now it's like
Shawn Flattery (12:05):
We we just gotta get banning my day. We bought a
house for 5 grand.
John Tripolsky (12:10):
Right. But interest rates, you know, they
were at 16 and a half percent.So, Sean, here's so that thank
you so much, by the way, forexplaining that because I,
again, I I hear that so oftenthat it's almost now I just
kinda tune out. Right?Especially going to, you know,
in the marketing world here.
I remember going to tons ofconferences and just hearing
(12:33):
people's way of describing this.It's like, get out of here. So
really, if you're smart and andyou I shouldn't say don't care
what you people think you drive,but, you know, the whole beater
with a heater mentality we usedto say up here in Michigan. It's
like, go get the cheapest carpossible that gets you from a to
b hopefully or at least almostall the way to b, has a heater
in it, and then take themileage, and you're actually
(12:55):
making some. Like, you're you'reway better off.
You would actually get
Shawn Flattery (13:00):
you know, you might not get more than what you
can, put into it, but it's realpossible for you to get a much
higher per, you know, percentageback. You know? If if you wanna
round it out now, this isn't allin 1 year because they limit how
much depreciation is in anygiven year. Even if you use
bonus 179, normal maker'sdepreciation, little taxi on you
(13:22):
there. I'm sorry.
But you got a vehicle for a100,000. Your your tax savings
and thus money back in yourpocket indirectly is gonna be
depending on your income isusually gonna fall somewhere
that 30% range. So even thoughyou bought a vehicle for a
100,000, your out
John Tripolsky (13:42):
of pocket cost is still gonna be 70. Makes
sense. And let's actually talkabout something too, and and I
know we've discussed this very,very briefly at a few podcasts.
Previous ones, there's been somecontent we put out there around
this. So let's talk about the6,000 pound
Shawn Flattery (14:00):
rule.
John Tripolsky (14:01):
So this this is a fun one to me. Right? Because
sometimes you look at you lookat all these vehicles on the
road, and you go like, listen,man. You do not need a Suburban,
or you do not need a fullyloaded full size diesel pickup
truck for what you do. Butthere's a lot of tax benefits to
(14:22):
that.
Right? Including, I think, themost interesting example of
this. I I could not remember forthe life of me if it was Land
Rover or it might have beenMercedes with the G WAG. I don't
remember what which one it was,but they had advertised it was
either a Business Insider,Forbes, or somewhere, but it was
a full page ad. I do rememberthat.
And it specifically talkedabout, the vehicle gross gross
(14:46):
vehicle weight being over £6,000and, you know, how this is
perfect for business owners. Soto me, I mean, this was years
back. It it kinda blew my mind alittle bit. Like, why in the
world is is this here? Andreally didn't talk a whole lot
about price, which I think waspretty smart, you know, from
those marketing and advertisingfolks.
But let's talk about that. Whyin the world does a vehicle that
(15:08):
weighs £6,000 or more, why isthat different from driving
around, you know, the, theexplosive, Pintos back in the
day. So I don't even know howmuch those were. Those weighed,
but they weren't much. And ifany I mean, every most people
know what a pintos was.
But
Shawn Flattery (15:27):
Yeah. Yeah. They they might have been a lot
because it was all steel backthen. But, yeah, if if you're
talking a £6,000 vehicle ormore, right, it's it's really
6000 to 14,000 that which ispretty much any vehicle outside
of very large constructionspecific vehicles. Once you're
(15:47):
over that 6,000 gross vehicleweight rating, now that expands
out how much depreciation youcan take in the year.
They really, really limit you toa a sub $6,000 vehicle is gonna
be limited to, like, 12,400 indepreciation. That's it. There's
nothing more. If, if you haveyour if if you have a vehicle
(16:09):
more than £6,000, you can nowtake bonus once of add
depreciation that can, eat upmost of the vehicle's costs.
You're still limited in totaldepreciation for any given year,
but it's much higher.
John Tripolsky (16:24):
And then so that's 6,000. Right? So that's
back to the example. Right?Like, you look at some people
and you're like, why do you needthat?
But either they really likelarge vehicles, they might have
a lot of employees, equipmentthey're hauling around, or they
are knowledgeable when it comesto this because there's no
limitation saying it has to be acertain type of business. Right?
(16:47):
It's just general and
Shawn Flattery (16:48):
Yeah. Yeah. And you you pointed out a couple of
big vehicles. Right? This isn'tthe weight of the vehicle.
It's it's a little bitdifferent. So it's a gross
vehicle weight rating. So thisis kind of a special, like,
maximum rating that this vehiclecould get in holding weight. And
(17:11):
so you might be looking at asmaller vehicle like a Mercedes
vehicle that it it's actuallyluxury they call it luxury
vehicle limitations. You youwould think of Mercedes as a
luxury vehicle.
Right? A bunch of theirvehicles, just barely, like,
6,100, 6,150 are right abovethat gross vehicle weight
(17:33):
rating, even though you'relooking at it going, that's a
small relatively small vehicle,its actual weight is £4,000 or
something because they gottakeep my the mileage per gallon
low, but they they get that GVRup above the 6,000 so you can
depreciate it. And, of course,then the marketers go to play,
and they start bragging aboutit.
John Tripolsky (17:54):
Right. We we're really good at twisting words.
Right? It's focusing on thebenefits. Exactly.
Of course. If if any marketersout there who twisted for the
negative, they're probably notin the you know, they might be
in politics or to leave thatalone. They but any anyhoo but
yeah. I mean, I I found it veryinteresting. Right?
(18:16):
So and really, Shout, like, whywhat might be the reason again
that they they really did that?Like, is it more, like, they
offer that £6,000? Is it toentice, you know Well one
purchase or another? Or what'sthe
Shawn Flattery (18:31):
The answer is it It's somewhere in a holistic
cause for and there's neverholistic with congress. The a
cause of allowing for realbusiness vehicles to, get the
full deduction, but also justcongress being congress. And
whatever side that you're on,you can probably agree that it's
(18:53):
it doesn't make a lot of sense.It is definitely a driver,
though, of why vehicles areheavier because fleets,
vehicles, if you go and get an f150 and compare it to a vehicle,
an f 150 in the nineties or theeighties, seventies, they were a
lot smaller than they are today.And part of that is because of
(19:13):
this, taxes.
Makes sense. Makes sense. Sothere and anybody too, if
John Tripolsky (19:18):
you have any specific questions to, for our
listeners on the 6,000 poundrule or any of this, as always,
reach out to us. Obviously,there's defeating taxes, the
private Facebook group, ping inthere. We got a lot of
information. But, Sean, before Ilet you go here, so let's talk
about one more thing that I knowI I know for a fact people have
had this question because we'vebeen asked this question. And
(19:41):
it's really buy versus leasetoo.
So maybe, you know, what whatwould be the benefits with each?
Obviously, I think everybodyknows what a buy is and what a
lease is. So I we don't need toexplain what that is
necessarily, but maybe give us acouple examples where one may
work better than the other.Maybe some things to watch out
for where you could think you'regetting a better deal, but
(20:05):
you're losing on a huge taxbenefit. Kinda walk us through
your your perspective of that,you know, being a tax pro.
Shawn Flattery (20:11):
Well, being a tax guy and, kind of concerned
on spending cash, I tend toavoid leasing, but there are
various reasons. Whether it'scash flow, maybe you don't
necessarily know if you needthis type of vehicle. You don't
wanna take ownership where leasedoes make sense. And, heck,
sometimes you just get a greatdeal on leasing. It this
(20:31):
happens.
From a tax perspective, it doeschange your options. When with
purchasing the vehicle, you youget the the depending on how
much you use it for, the betterof mileage or actual costs. And
that includes all all of thecosts of running it. But for
(20:53):
lease, you're you're morelimited to you don't get that
depreciation. Right?
You don't own that vehicle. Soall you can write off is the
monthly payment that you haveplus the cost of operating. So
if you have a a $500 a monthlease, then you're looking at a
$6,000 a year lease cost plusyour mileage, insurance, and all
(21:16):
the other things. Or you can dothat mileage. Same, same thing
as a 67¢ per mile.
It it really so it some of
John Tripolsky (21:24):
it may boil down to simply to somebody like
getting a new vehicle every 2years and not having
Shawn Flattery (21:28):
to worry about, you know, for however long.
Yeah. Yeah. Yeah. For sure.
Like, I I drive mine tillthey're they're rust bucketed
out. But some might like them.Yeah. Brand new shiny vehicle
every year. So that's that fromthat perspective, I try to like
any vehicle, hey.
(21:49):
They come to me, hey. Should Ibuy a vehicle? You know, from a
tax perspective, it might makesense. You might get a benefit
from them, but I'd never suggestbuying a vehicle just for tax
purposes. It's gotta make sensefor you economically and from a
cash flow perspective.
So if you're looking to buy that$100,000 truck, but you don't
(22:11):
need a truck, and you don't havethe cash flow for the truck, the
tax savings isn't gonna outweighthe cost. And the car salesman
out there hating us for sayingthis because they were open on
their Christmas bonus.
John Tripolsky (22:24):
You know, they get everybody, you know, the the
week before the end of the yearthat's in there trying to buy
vehicles. And I'm sure so oh, sohere's another dumb question I
just thought about this too. So,for example, right, so a lot a
lot of my friends are in theconstruction space. So they all
went out and bought it. They buynew trucks all the time for some
reason.
Who knows? And and you're right.Some of them are, you know, darn
(22:46):
near a 150,000. So some of themwent. They bought vehicles.
So we'll say during the coveduring COVID time. Right?
They're buying these vehicles,but some of them waited almost a
year and a half to get it. So Iimagine it's that point of
registration that you couldstart any deductions on any of
that. Right?
(23:06):
It can't be like, oh, I I putdown a 50% cash deposit or I
paid for an up I don't knowanybody pays for 1 up front if
Shawn Flattery (23:13):
you were it. But would it have
John Tripolsky (23:15):
to be a point of delivery?
Shawn Flattery (23:17):
Yeah. It it would be a boy like, point
delivery or registration isn'tquite it. You could own a
vehicle for 5 years and thenplace it in service and then
start depreciating the vehicle.It's really the point of when
it's actually available forbusiness use. So whether you're
waiting a year and a half forthat vehicle to show up so then
(23:38):
you can use it for business, oryou've been sitting in your
personal use for years, and nowall of a sudden you're using it
for business.
Same thing. It's the date thatit becomes available for
business use is the magic dayand year thus that depreciation
starts, and you
John Tripolsky (23:56):
can start taking those deductions. Makes sense.
I'm scraping the barrel for themost random questions I can
think of to ask you. So Well, I
Shawn Flattery (24:04):
I tried. I tried. Maybe you didn't realize
it, thought of it. Like, thatend of year purchase. Right?
You're going to buy a vehicle.It's coming in at the 31st, last
couple days of the year. That Imean, from a regular normal,
like, 5 year depreciation, whichis that maker's kind of as slow
(24:25):
as you can make it depreciation,that's gonna be really low.
Right? But the accelerateddepreciation, like 179 or bonus,
those still apply just as if youhad bought it on January 1st.
John Tripolsky (24:37):
Makes sense. Makes sense. It's all So
Shawn Flattery (24:39):
you can get it. If you're really trying to time
things out, you might get a taxbenefit and even a cash refund
if you file your return earlyenough before your first
payments are coming in for thatbrand new vehicle you got on
December 31st.
John Tripolsky (24:52):
And not to even get into EVs because I know me
and, me and Chris had adiscussion on this couple months
back. But I know, like, leasing,for example, with that just
kinda recap what we spoke abouta while ago. I know with EVs.
Right? So say you lease anelectric vehicle.
You're you're really opting outof being able to take any of the
(25:13):
personal credits, deductions,whatever they're offering for
EVs because the vehicle isreally not yours. It's the
dealership. So the manufacturer,I believe, is the ones that's
taken those rebates if you werethe federal tax credits or
anything through that. But,obviously, if you purchase it,
that's a that's a differentdeal. So I think they weigh that
into the the least pricesusually, and it's outlined in
(25:36):
all their marketing andadvertising, but there's always
credits around it too.
So I think there's the, there'sa used vehicle one.
Shawn Flattery (25:43):
Yeah. Yeah. So that that's pretty much you
you're you're pretty much nailedin it. If you're leasing an
electric vehicle, there's that7,000 up to $7,500 energy credit
tax credit for an EV vehicle. Hegoes to the owner of the
vehicle.
So if you're leasing thevehicle, then you're leasing it
from someone else. Could be thedealer. Could be, could be Tesla
(26:05):
directly. Either way, whoeverowns that vehicle that's it's
being leased from gets thatcredit. I have seen quite often
where that credit is thenbasically applied towards the
cost of the lease.
So you still get it indirectly,but you don't get to put it on
your tax return.
John Tripolsky (26:24):
If anything, I'm sure they kinda take it into
account when they come up withthe I, the depreciated value at
the end of the lease because weall know yeah. Yeah. We'll we'll
leave EVs out out of it a littlebit. That's a it's a whole
another discussion. I thinkeither side of the fence,
somebody especially being inDetroit.
Right. So up here, people eitherlove them or you hate them.
There's very few people that arekind of in the middle. We don't
(26:46):
wanna we don't wanna piss off50% of our audience.
Shawn Flattery (26:49):
Yeah. Yeah. The the only thing I would wanna add
on the EVs just to watch out,there's a sometimes overlooked,
unique thing about the EVs andthat tax credit. If you were to
buy a EV, and we'll we'll usethat. What were you saying?
A $60,000 truck. If you were ifyou were to buy an EV for
(27:09):
$60,000 and then get that $7,500credit, you can depreciate the
full 60,000. You have to takethe cost of your vehicle, 60,000
less the credit of 7,500 ifthat's what you get. Mhmm. So
then your depreciation that youcan take is 52,500 over the the
(27:35):
the life of that vehicle'sdepreciation.
That's a great point. Greatpoint. That that that was
tricky. Even, when I'm workingwith my team who works just
taxes year round, they'll missthat. It's an easily overlooked
difference for EVs.
John Tripolsky (27:51):
I'm sure it's buried somewhere in the IRS
publication that is about a milesick, and, you know, you'd have
to kill a 1500 trees just toprint that thing. So yeah. I
mean, of course, you guys knowevery single page of that. The
right? Of course.
How dare you miss anything?
Shawn Flattery (28:08):
It's why we're reading material every night to
go
John Tripolsky (28:10):
to bed. Yeah. Makes sense. Makes sense. But
speaking of going to bed of andand the pink and purple floor
mats, of course,
Shawn Flattery (28:21):
like a pillow.
John Tripolsky (28:22):
But, yeah, speaking of going to bed,
hopefully, this topic didn't putanybody to sleep. Actually, I'm
I'm sure it didn't because if itdid, you probably just turn it
off. But I'm glad we touched onthis again, kind of as I alluded
to at the beginning. There's alot of confusion around this,
and I wouldn't I wouldn'tnecessarily put it in the bucket
of ignorance in a bad sense.It's just I think it's sometimes
(28:43):
when people think of, right,going into business for
themselves, you know, the whole,entrepreneurship is all glitz
and glamour, pink and purplefloor mats and, you know,
glitter.
It's not. So not everything isfree. There are some
complications when it comes todeductions and and write offs
and all this stuff and whatexpenses qualify for what. And
(29:05):
this I this I would say isprobably, in my opinion, from
what I see again, one of themost probably misused,
unintentionally misunderstoodones from the taxpayer side. So
thanks for diving into it, Sean.
I know I know I appreciate it,and hopefully our listeners do
too. So we'll have to have youback on here. Maybe we'll do a
(29:26):
car and truck 2.0 eventually.
Shawn Flattery (29:29):
Yeah. I'm sure there'll be some follow ups.
Yeah. They they did make, likeall tax laws, they tried to make
this clear to the mud. And andthis one just has its own unique
things, and it's not a commonquestion or concern, within the
clients I've worked with overthe years.
And, of course, when someonefinds out that I do taxes for a
(29:49):
living hey. Dinner. Well, I gota tax question about my vehicle.
Yep. Of course.
John Tripolsky (29:56):
Always. Always. But awesome, buddy. Well, I
well, I appreciate you joiningus back up here again on the
podcast. I know you listen toit, which is always great.
And I should have quizzed you onprevious episodes to see which
ones you actually did listen to.But, you know, I won't, I won't
harass you too. Thank goodness.I can't even remember all the
ones we've been. So Yeah.
Shawn Flattery (30:16):
The memory
John Tripolsky (30:17):
yeah. I have the memory of the field mouse, man.
Shawn Flattery (30:19):
I don't remember what happened yesterday.
John Tripolsky (30:21):
But you know the tax pump. That's the important
part. We don't care about whatyou did yesterday. Yeah. Nobody
else cares about you.
Alright. So well, thank you somuch, my man. We appreciate it
as always. And, again, as Imentioned a little bit earlier
on too, any questions on thistopic, please, please, please
feel free to reach out to ushere at teaching tax flow. You
(30:42):
should just email at hello atteaching tax flow dot com.
Go on our Facebook page atdefeating taxes is that private
Facebook group, growing likewildfire. And literally, we make
it as easy as possible unlikecongress and the IRS do for
taxpayers. Go to defeatingtaxes.com. It sends it straight
to that Facebook page. So Idon't have to give you the long
(31:03):
URL.
Tell you to click here, clickthere, spin around twice tapping
your forehead, and then you'rein. It's that easy. There's no
excuse. That's your private end.As always, we will see everybody
back here on the podcast nextweek, different topic, roughly
the same time.
See you soon.
Disclaimer (31:24):
The content provided is for educational purposes
only. We encourage you to seekpersonalized investment advice
from your financialprofessional. For all tax and
legal advice, please consultyour CPA or attorney. Investment
advisory services are offeredthrough cabin advisors, a
registered investment adviser.Securities are offered through
Cabin Securities, a registeredbroker dealer.
The content of this podcast doesnot constitute an offer of
(31:46):
securities. Offerings can onlybe made through an offering
memorandum, and you shouldcarefully examine the risk
factors and other informationcontained in the memorandum.
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