Happy Friday everyone!
Let's wrap up this week with another video from me and Mona (my trusty assistant). Today's educational piece is one of repetitive pieces of content I have seen on IG and TikTok and the news in general which Sec 179. Everyone talks about the benefit of that year one deduction of a vehicle used in business more than 50% of the time that weighs over 6,000 lbs. What they don't tell you is that there is a cost to this.
What is that cost? check the video and here are highlights:
🔥 The benefit of the 5 year MACRS depreciation over the next 4 years (or however long you choose to hold it for before you sell or trade in) at higher tax rates.
🔥 The fact that you have to pick up the income on the value of the trade in with no basis (if 179) and with some basis if you took depreciation over the years.
🔥 If your entity is owned by trust, that 179 deduction is trapped at the trust level and will not flow through further. Be very cautious with this!
I am not here to pontificate on which one is better, I am just here to drop the knowledge, give you food for thought, and you may now go and discuss this with your accountant before you buy that super sweet G Wagon and flex on your friends ;)
Have a great weekend!
As always this is just meant as entertaining tax content and not tax advice.