Are you a Small Business Owner who is looking to Learn How to Maximize your Tax Savings using a Tesla Model S Tax Write Off? Do you want to Learn what amount is tax deductible and how to qualify for maximum Section 179 and Bonus Depreciation? In this article we will be discussing how to get Maximum Tesla Model S Tax Write Off in 2022-2023.
Tesla Model S Tax Write Off
In order to write off a Vehicle it need to meet many requirements for you to be able to take it as a Tax Write off. These requirements include but are not limited to
Business Percent Use
IRS requires you to keep track of your miles so you can determine if you are using your business vehicle 70% for business or 90% for your business. You are only allowed to write off the amount that is used for business and not for personal.
Ordinary and Necessary
In order for the Tesla Model S Tax deduction to be allowed, it need to be ordinary and necessary in the field of work you are in.
For example in construction, you will need pickup to haul materials. That will be considered Ordinary and Necessary.
Furthermore, If you are a Luxury Home Realtor, then a Luxury SUV may be a tax write off as your Customers Expect you to take them out in a luxury vehicle showing them $5 or $10 million dollar properties.
Gross Vehicle Weight
If the Vehicle is 6000 pounds or more, then you are allowed to write off full value of the vehicle as long as its 100% business use and placed in the service in the year you are doing the tax write off for.
If any vehicle is less than 6,000 pounds max you can do in 2022, is $18,200 first year and remaining over 5 year period.
Tesla Model S Lease Vs Purchase
Lease Example & Calculation
If you lease a business vehicle, you get to write off the actual amounts you paid for example if you lease Tesla Model S( 36 Month Lease) and Put $3,000 Down Payment(Lease Buy Down) and $1000 Per month for the entire year. Then you write off the lease as following:
Lease Deposit $3000 Divided by Lease Term 36 Months So you will get $1,000 Per year
Yearly Lease Payment: $1000 Times 12 Months is $12,000
Total Tax Write off $1,000 Plus $12,000= $13,000 for the year.
Purchase Example & Calculations:
If you purchase the Vehicle for $110,000 and put down $10,000 and finance the remaining over 60 months the calculations will work the following way assuming 100% business use:
Since this purchase doesn’t qualify for vehicle equal or more than 6000 pounds, maximum 1st year deduction using bonus depreciation and section 179 is $18,200. Remaining $91,800 needs to be spread over 5 years.
You can take Standard mileage deduction of 58.5 cents( in 2022) a mile but it is beneficial if your vehicle purchase price is very low for example $5,000. We do not recommend that as the actual deduction when the vehicle purchase price is higher.
Tesla Model S Gross Vehicle Weight (GVWR)
2022 Tesla Model S Gross Vehicle Weight (GVWR) is 5596 lbs.
Hence, Tesla Model S doesn’t Qualifies for the 6000 Pound or more requirement(Per IRS) and using a combination of Section 179 and Bonus Depreciation you can get $18,200 Deduction on a Vehicle purchase price including Fees and Sales Taxes.
Tesla Model S Tax Write off California
California has very specific rules pertaining to depreciation and limits any Section 179 to $25,000 Maximum per year. So for example, if you purchase a vehicle for $75,000,
you can write off $25, 000 as Section 179 in first year and remaining amount of $50,000 in this example has to be spread over 5 year period. This rule only applies for vehicles over 6,000 Pounds. For Tesla Model S you are limited to $10,200 as Section 179 Deduction.
While IRS allows Bonus Depreciation, California doesn’t allow Bonus depreciation and the entire amount is added back to your State return where it is taxed.
Tesla Model S 179 Deduction
Internal Revenue Code, Section 179 Deduction allows you to expense up to $25,000 on Vehicles(One year) that are between 6000 Pounds and 14,000 Pounds or More in the year they are placed in service. Since Tesla Model S is less than 6,000 pounds maximum section 179 deduction for Model S is $10,200. (Please note that you can get another $8000 in bonus depreciation on top of section 179 deduction to get maximum tax deduction of $18,100.
If you are looking to write off the entire purchase price of the vehicle, look into Bonus depreciation rules that were passed under TCJA, we recommend purchasing a vehicle over 6,000 lbs. In this case you can consider Tesla Model X
To learn more about Section 179 See Details here
Tesla Model S Bonus Depreciation
Bonus Depreciation has been significantly improved by the Tax Cuts and Jobs Act.
Under new TCJA, Bonus Depreciation allows you to deduct a specified percentage of the cost of assets in the year they are placed in service.
This deduction allows you to take your profit to negative as compared to Section 179 which only allows you to break even or make your profit zero.
For vehicles such as Tesla Model S that are less than 6000 pounds, can be deduct $18,200 in the bonus depreciation(Including Section 179) the year purchased and placed in service.
Tip: Under Bonus Depreciation rules, you can even purchase a Used Tesla Model S and use Bonus Depreciation.
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