How’s this section 179 plan?

[FinanciallyUnconscious]

I have a Rivian R1S on order that should come in the next 6 months. It’s just over 7,000 lbs so it qualifies for the section 179 heavy vehicle deduction. I wasn’t sure I’d be able to meet the criteria, but I have friend who had some ideas on how to make it work. I’m wondering whether these ideas are reasonable, or more of the hair-brained variety.

My understanding is that I need to use it for at least 50% business to get the deduction. I think I can make that happen - but want to keep it legal.

I’m a self-employed psychiatrist with a hybrid telehealth & in person practice. I have a dedicated home office that I do work from each morning before I travel to my other office for work. It’s about 5 miles each way. I’ll use the Rivian for this, which I believe counts as business miles.

This is a small distance- so may in itself have a hard time reaching >50% of my miles, as I’d also hope to use the vehicle for a nonzero amount of personal miles.

My friends suggestion was I could increase the proportion of business miles by
1) making sure to drop by PCP offices to market my telehealth practice while traveling to nearby areas
2) Taking nature photos for my website while camping, making them “business miles”
3) I regularly consult with other therapists around town - so mark these meetings as business.
3) Using our other vehicle for a large chunk of
our personal trips.

How does this sound? If it works - it’s a huge savings on an amazing vehicle. However- I also want to be cautious and not fly too close to the sun of audits. Any thoughts appreciated.

[jfoxcpacfp]

Doesn’t pass the smell test for me. Driving to your 2nd primary fixed location sounds like a commute. Taking nature photos by the water? Just pay somebody who doesn’t need a luxury car to do that and save money. Driving to other therapists (instead of phone or Zoom?) would be business. Who needs to travel to consult these days? And, if you’ve always been deducting them as business expenses, no need to stop.

Now that you have this ”amazing” new vehicle, why the heck wouldn’t you use it for its intended purpose: enjoyment, such as on personal trips? What motivated you to buy it?

• Ordinary and necessary business expense (remember, that’s the definition) or
• Personal gratification (nothing wrong with that, if it’s an affordable goal you have planned for)?

I think you are trying to hard to focus on the tax benefits rather than simply enjoying your wealth. Those two should not be intertwined.

[bovie]

*Harebrained.

And yes, it is.

[Larry Ragman]

Did you look at the federal EV credit? As was pointed out to me on another recent thread, the rules have been updated in 2023. Rivian are eligible.

[spiritrider]

Some things to understand about Section 179, bonus depreciation and standard depreciation for "heavy" SUVs:

• There are caps by year for Section 179 SUV expense deductions and combination caps with depreciation deductions.
• The actual amount is prorated based on the business use percentage. I.e. you really want to be legitimately as close as possible to 100% the year you place the vehicle in service.
• Bonus depreciation is being phased out. It will be 80% in 2023 and based on your fairly tight delivery schedule. It will be 60% if it pushes to 2024
• Finally, if you dispose of the property or fail to maintain > 50% business use over six (6) tax years. There will be prorata recapture of Section 179 or bonus depreciation amounts.

Are you really sure you know what you are trying to sign-up/commit to? It is a serious commitment when you have a reasonably easy legitimate business use. It can be a nightmare if based on rationalization and justification.

[FinanciallyUnconscious]

Some things to understand about Section 179, bonus depreciation and standard depreciation for "heavy" SUVs:

• There are caps by year for Section 179 SUV expense deductions and combination caps with depreciation deductions.
• The actual amount is prorated based on the business use percentage. I.e. you really want to be legitimately as close as possible to 100% the year you place the vehicle in service.
• Bonus depreciation is being phased out. It will be 80% in 2023 and based on your fairly tight delivery schedule. It will be 60% if it pushes to 2024
• Finally, if you dispose of the property or fail to maintain > 50% business use over six (6) tax years. There will be prorata recapture of Section 179 or bonus depreciation amounts.

Are you really sure you know what you are trying to sign-up/commit to? It is a serious commitment when you have a reasonably easy legitimate business use. It can be a nightmare if based on rationalization and justification.

I appreciate you laying it out like this- it definitely makes it seem like a commitment on shaky ground. Will be steering clear of this one.

[FinanciallyUnconscious]

Did you look at the federal EV credit? As was pointed out to me on another recent thread, the rules have been updated in 2023. Rivian are eligible.

Yes! Rivian actually had me sign a binding purchase agreement awhile back before the rules changed, so I’ll have the original $7,500 rebate locked in. This is on top of them honoring pre-price hike pricing. So even without the section 179 vehicle deduction I’d be getting a vehicle with an MSRP of $95,000 for around $67,000.

[FinanciallyUnconscious]

Doesn’t pass the smell test for me. Driving to your 2nd primary fixed location sounds like a commute. Taking nature photos by the water? Just pay somebody who doesn’t need a luxury car to do that and save money. Driving to other therapists (instead of phone or Zoom?) would be business. Who needs to travel to consult these days? And, if you’ve always been deducting them as business expenses, no need to stop.

Now that you have this ”amazing” new vehicle, why the heck wouldn’t you use it for its intended purpose: enjoyment, such as on personal trips? What motivated you to buy it?

• Ordinary and necessary business expense (remember, that’s the definition) or
• Personal gratification (nothing wrong with that, if it’s an affordable goal you have planned for)?

I think you are trying to hard to focus on the tax benefits rather than simply enjoying your wealth. Those two should not be intertwined.

Very good advice! My “enjoy life” self and “financial independence retire early” self are at odds. Finding a middle ground through tax reduction seems nice, but probably not worth it if it brings more stress than it removes.

I’m a tech loving auto enthusiast with an outdoor lifestyle and need for 7 seats- the vehicle checks all those boxes, plus is a great commuter given its an EV. It seems like a perfect fit - my frugal side is just finding it hard to justify the cost.

Thanks!