One item not yet discussed - a hybrid Wrangler will have a GVWR of 6000+ pounds, qualifying it for a big tax giveaway: Section 179

Fikestrel

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It is ultimately a giveaway to business owners. My FIL does it every year, failing to account for the sale of the asset - the IRS doesn't have the means to track the asset after the first year, again by design. The taxpayers are paying my FIL to buy a new King Ranch each year.
Not only is it a giveaway to business owners, but then by extension, the manufacturer. Fiat also benefits because they sell a vehicle that lots of people couldn't afford without the tax deduction. It really is a shame when tax benefits like this roll-up towards luxury buyers instead of people trying to buy vehicles for things like small trades businesses or construction.





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KSpider

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Not only is it a giveaway to business owners, but then by extension, the manufacturer. Fiat also benefits because they sell a vehicle that lots of people couldn't afford without the tax deduction. It really is a shame when tax benefits like this roll-up towards luxury buyers instead of people trying to buy vehicles for things like small trades businesses or construction.
people buying benefits for small trades and construction still get a tax benefit...
 

Fikestrel

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Definitely! That’s totally legit. That’s what the deduction is intended for...to help small businesses grow.

What I don’t like to see is when people use deductions like this to subsidize their purchase of an Escalade for their business as a financial advisor.

Now back to the PHEV Wrangler, I can think of a few cases where it could be a practical business expense, but a Wrangler isn’t really the most utilitarian in a normal commercial way. It doesn’t carry many people or much stuff. I guess if weather and rough roads were your major concern, it might work. It might make a good commercial vehicle as a shuttle at a ski resort, but the cold weather and short range might make the battery less valuable. On the Outer Banks of North Carolina there are a lot of houses that are on the beach with only over-beach trail access, so maybe delivery services to those houses would be a good commercial application for the PHEV. Unless your business has lots of short local trips with an ability to plug-in in between trips, the wrangler PHEV probably isn’t a great business investment.
 

Jehovasfitness

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Sorry for the basic question.

If we are in the 22% federal tax bracket is it safe to assume that if this were to qualify for the 179 deduction that in the first year this would decrease our federal tax by 22% of the cost of the PHEV?

For a simple example. Let's say the Rubicon PHEV is $60k

$60k x .22 = $13,200 less owed in taxes? (Assuming 100% business use)
Now let's say business use is 60% would one just take the $13.2k x 60%?

Not sure what first year depreciation bonus would be or how that would change things.

Not including any state tax savings.

thanks
 

KSpider

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Sorry for the basic question.

If we are in the 22% federal tax bracket is it safe to assume that if this were to qualify for the 179 deduction that in the first year this would decrease our federal tax by 22% of the cost of the PHEV?

For a simple example. Let's say the Rubicon PHEV is $60k

$60k x .22 = $13,200 less owed in taxes? (Assuming 100% business use)
Now let's say business use is 60% would one just take the $13.2k x 60%?

Not sure what first year depreciation bonus would be or how that would change things.

Not including any state tax savings.

thanks
Assuming that business had 60K+ in profit, then yes you are sort of correct. I am not a CPA, and I believe 2020 has a lower than 100% first year deduction, my CPA says its 25% + 50% bonus depreciation, so its not going to be the full 22% for you in the first year.
 

Jehovasfitness

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KSpider

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Hmm, this is showing 100% bonus depreciation

https://www.section179.org/section_179_deduction/
I think the issue is there is a different rule for passenger vehicles... it has been 100% for a long time which has made it easy. Now I believe there are limits on passenger vehicles, which his why I am defaulting to what my CPA told me, it is what it is... it will eventually fully depreciate, and there is a big benefit in the first year, whether it be 50-75%, so ill take what I can get.
 
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JandS

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I think the issue is there is a different rule for passenger vehicles... it has been 100% for a long time which has made it easy. Now I believe there are limits on passenger vehicles, which his why I am defaulting to what my CPA told me, it is what it is... it will eventually fully depreciate, and there is a big benefit in the first year, whether it be 50-75%, so ill take what I can get.
Once you're over 6000 GVWR, it is no longer a passenger vehicle...and the 4XE should be over 6000.
 

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JandS

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Wanted to revisit this. Math for us works out to:

Purchase price: $56,000 (rounding to make easier math)
Plug in tax Credit: ($ 7,500)
179 depreciation: ($ 13,440) (56,000 * .24 tax rate)

Total cost: $35,060

That is damn good value.
 

Demonic

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Don't you also have to be able to show that the vehicle is being used for a necessary business purpose other than commuting?
 

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