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Model S for business use

Hi,
I've tried hard and long with no luck to find answers for taking depreciation deductions (Section 179). I'm sure others have done this. Pls share your thoughts.

1. I am 100% shareholder of an S Corp.
2. I will be using the car for 80% business use.
3. I will be taking the 179 deduction as mileage is not huge for me.

Questions
1. Should the S Corp own the car or can I purchase the car personally?
2. If S Corp owns the car, will I need commercial auto insurance? How much more expensive is it than a personal one?
3. What is the impact on yearly tags in CA?
4. Any issues in financing? Alliant seems to have great rates but I'm not sure if they finance cars which are held in the name of a corporation.

Thanks in advance.
Ajay

@ Ajay, as someone who is considering purchasing a Model S - not at insignificant cost - it might behoove you to spend another $200 and get sound advice from a CPA or tax advisor. As far as lending is concerned, I don't know any consumer lending institutions that would finance an LLC or Corp. As far as I know, the car has to be in your name personally because it is your personal credit that is used to decision the financing. The latter is true of home mortgages, expect it to be similar for auto loans.

Alliant will not finance the car if titled in the name of the corporation. Found that out the hard way when they forced me to change the title to my personal name or they'd increase the interest rate to a "punitive 24.000%". I already purchased a commercial policy from Progressive for ~$1500/year - I'm not sure if I need to change that policy to my personal name - anyone know?

@AmpedR, I have my CPA chat on Monday. I'll post what I hear then. I know that Tesla financing Allows me to have the title in the corporations name.

@Mike, that's what I feared. If my CPA tells me that the car must be in name of the corporation for 179 deduction, then there are additional costs in terms of increased interest rate and insurance. Not sure they outweigh the 179 deduction benefits but certainly have more strings attached.

You won't be able to take 179 for a Tesla. Most passenger vehicles, especially high end are what the Tax Code calls "listed vehicles." Depreciation is limited on a listed vehicle. 179 applies to general fixed assets and certain work trucks and service vans.

You can still buy it in your name and put it on a 2106 and take the limited depreciation depending on your business use.

Depreciation may not be 179, but it's still accelerated. No reason you can't own the car and still take depreciation and expenses on your personal return, but insurance costs could be higher if it is mainly for business use.

After talking to my accountant and explaining that we put the MS in our personal name and not the business name, she said it should have been in the business name. But it is not a huge deal as long as all expenses are paid out of the business account and not a personal account. (monthly payments, insurance, gas etc.)

And like DouglasR, she agrees with the accelerated depreciation.

gas?

Oooops! Electricity I meant!

Heres an idea. Have your accountant help you set up a three year lease with a leasing company that understands why this is being done. The monthly payments should be as high as possible which allows you to depreciate it really fast. After the lease is up you can have the car for the agreed on on buyout price. A good CPA and leasing company will understand exactly how this works and it is 100% legal too. The leasing company may want 4 or 5% but it's well worth it if you have enough money up front for the high lease payments.

But if you lease you can't get the $7500 tax rebate, right?

We are an LLC taxed as a C-Corp. After lots of discussions with our CPA, we decided that I would personally purchase the Model S, and the company would make the payments. Each month the payments are reported as compensation through our payroll company. I then submit expense reports for business miles at the standard IRS mileage rates.

You still get the tax credit when leasing.

Has anyone successfully leased the tesla through a business? If so, what leasing company was used?

Last year I bought a new Lexus for about the same cost as a mid-range MS. I placed *BOTH* my personal name and S-corp name on the title. There was absolutely no difference with insurance or otherwise using State Farm. My CPA assures me it is "the best of both worlds" method to doing it.

You are fine owning it personally. Have the company document that they do not reimburse the owner for auto expense and the owner needs to provide his own auto. As an S Corp, you will receive a K-1 from your business and include this on Schedule E. You deduct the auto expenses (depreciation, electric if tracked separately, insurance, repairs, etc.) as Unreimbursed Business Expenses (prorated for business use), which will go on Schedule E and reduce your income. Make sure to document your business use. With accelerated depreciation you will hit the depreciation cap, so won't be able to take Section 179. Section 179 could come into play for the Model X (if it is classified as an SUV and has a loaded Gross Vehicle Weight over 6,000 lbs.)

I was in the exact same situation when I got my MS in June.

I tried to find a leasing company to basically do a 3 year lease that would pay the car off in full, but none were able to do this because it is a vehicle as @scottmarshall suggested. For some reason, they could do this for trucks, but not cars. I don't remember the detail but multiple commercial leasing companies said no.

That left buy the car in my name or my companies. To qualify for Tesla financing and get the 3-yr. resale guarantee, it had to be my name on the title, but I could co list my company and have it make all the payments. This would have allowed me to deduct all costs and use accelerated deductions. This would have required the business to take out a commercial policy on it.

The other option was to buy it personally and take $.58 per mile and I drive about 15,000 mpy.

As it turned out, buying it myself and taking the mileage allowance was within 10% of having the company buy it and much simpler, so that is the route I took.

Hope this helps.

TAD

This thread reminds me once again why we need to move to a simplified tax code.

Just look at the time effort and money required to figure out this one question....

Scott
I thought of that same lease scheme. The problem is that if you buy it and then turn around and lease it to your company, you have to claim the income you receive for the lease and then try to offset that income with limited depreciation. I'm not even sure that an individual can even depreciate a car. Regardless, even if you can depreciate the car , it's not bonus depreciation. It'll take you nearly 25 years to depreciate a MS all the way and meanwhile you're paying income tax on the lease payments that the S Corp is paying you. It just doesn't work.

@ajayv...what was the final outcome ? Could you please share.
I'm in a similar situation. I own a LLC taxed as C Corp. My CPA suggested to have the Car on my company's name but the Credit Unions offer business auto loans for a much higher rate.

This is an old June thread; he promised an update in a few days and never came back.

I am in the same exact situation as Ajay.

I spoke to my CPA and he advised that the car be put into my personal name in order to benefit from the tax incentives of the EV, to make financing easier and to get a lower cost of insurance since commercial policies are more expensive.

He said it would be great if the corporation could pay for 100% of all the expenses (deposit, DMV fees, taxes, down payment, monthly payments, service, etc.) directly from the corporate account which I am doing. I am even having the corporation pay to have the NEMA 14-50 installed in my home.

Bottom line was to put the car in my name but have the corporation pay 100% of all car expenses.

The only thing I have not decided on is if I should lease or buy the vehicle. I'm not even sure if anyone leases the vehicle. If I buy it then I will still have to decide if I should go through Tesla for the 3 year buyback guarantee or just go through my credit union, save interest and not have to put 15% down.

I will have the loan on my name and add the company name on the title. Hopefully I see no issues through the loan process.

I'm also in a similar situation...For Atlantian, is your CPA coding it as something different/specific, or are you just using your business to pay it as an 'expense'? My delivery date is early Dec., so trying to figure out the best way to finance it. Thx.

One of the major reasons for creating a Limited LIABILITY Corp is well Liability.

Seems like to putting your personal name and business name guarantees you have total liability rather than limited.

I will leave it to the attorneys to elaborate on that one.


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