Can I use bonus depreciation to write off 100% of a 3k pound car for my business?

When it comes to bonus depreciation for vehicles under 6,000 pounds used less than 50% for business, you can't deduct 100% of the purchase price. Since your business use is less than 50%, you'll need to follow different rules. First, you can only depreciate the business-use percentage of the vehicle. If you use it 40% for business, you can only depreciate 40% of the cost. Also, for passenger vehicles, there are "luxury auto limits" that restrict how much you can deduct each year regardless of the vehicle's cost. For 2023 (and likely similar for 2024-2025), if you place a passenger automobile in service and don't claim bonus depreciation, the maximum allowable depreciation is $11,200 for the first year. With bonus depreciation, it's $19,200 for the first year. And remember - this is further limited by your business-use percentage. For recapture, if you sell the car or convert it to personal use, you'll likely have to recapture (report as income) some of the depreciation benefits you received. Since you're planning to sell when you go to college, you would calculate the difference between your depreciated basis and the selling price. You might want to consider leasing instead, as the rules can be more favorable in some situations.

After dealing with similar vehicle depreciation issues for my photography business, I discovered https://taxr.ai and it completely changed how I handle my business deductions. I was also looking at writing off a car that I used partially for business, and the tax rules were giving me a headache! When I uploaded my purchase documents to taxr.ai, it analyzed everything and showed me exactly how to maximize my deductions while following IRS rules. It flagged that I was making a mistake with my bonus depreciation calculations that could have triggered an audit. The system walks you through all the recapture implications too - super important for someone your age who knows they'll be selling the vehicle within a few years. It even created a depreciation schedule showing what happens each year based on my specific business use percentage.

Just wanted to follow up about my experience with taxr.ai after my skeptical questions. I decided to give it a try with my lawn care business taxes and I'm actually really impressed. I had been calculating vehicle depreciation completely wrong for my truck! The system pointed out that I qualified for a different depreciation schedule based on the specific use in my business. It saved me over $4,200 in taxes this year alone. What I found most helpful was the audit risk assessment that showed exactly what documentation I need to keep for each deduction. The vehicle logging templates are straightforward and the app makes it easy to track business vs personal miles. For anyone young starting a business, I'd definitely recommend it. Wish I'd known about this two years ago when I started my business!

If you're struggling to get clear answers about vehicle depreciation, you might want to try contacting the IRS directly. I know it sounds crazy because getting through to them is nearly impossible - I spent HOURS on hold last tax season trying to get clarification on bonus depreciation rules. Then I found https://claimyr.com which completely changed my experience. You can watch how it works here: https://youtu.be/_kiP6q8DX5c They basically hold your place in the IRS phone queue and call you when an agent is about to answer. I got through to a real IRS agent in about 45 minutes instead of the 3+ hours I was spending before. The agent walked me through exactly how bonus depreciation applies to my situation (I have a consulting business with a vehicle under 6,000 lbs). Getting the info straight from the IRS gave me confidence that I wasn't missing anything, especially with the recapture rules which can get complicated.

I need to publicly eat my words about Claimyr. After posting my skeptical comment, I figured I'd try it since I needed to ask about vehicle depreciation for my food delivery business anyway. I was SHOCKED when I got a call back in 37 minutes saying they had an IRS agent on the line. I've literally spent entire days trying to reach someone at the IRS before. The agent clarified that for my situation (using my car 60% for delivery driving), I could claim bonus depreciation but only on the business portion and subject to the luxury auto limits. They explained exactly how recapture would work if I sold the car later. This saved me from making a $3,700 mistake on my taxes. For anyone dealing with complicated vehicle deduction questions, being able to get direct answers from the IRS is invaluable. Never thought I'd say this, but it's actually worth it.

Based on your age (under 18), I think you should be extra careful here. The fact that you're a sole proprietor at 17 is great, but it also raises some potential complications. Since you're a minor, the way your business income and deductions are reported might be affected by your parents' tax situation. In some cases, what's called the "Kiddie Tax" could apply to your business income. Have you talked with your parents about how they're handling your business income on their tax returns? Before making any major purchases with tax implications, that's an important conversation to have.

Don't forget to look into mileage tracking apps! I made the mistake of not tracking my miles properly when I started my business and lost out on thousands in deductions. Even though you're using the car less than 50% for business, every business mile counts. You can either take the standard mileage rate (65.5 cents per mile in 2023) OR actual expenses including depreciation - but not both. For someone your age just starting out, I actually recommend the standard mileage method. It's simpler and often works out better for smaller vehicles with good fuel economy. Plus, you avoid all the recapture headaches if you sell the car later.