I’ve been reading too much and starting to get confused so hopefully someone can help me understand this better. My CPA is unfamiliar so are looking into it but they always take the cautious side.
I own a liquor store, and sold my license this year for a large amount of money due to the age of the license giving it value…
I then attained a new license and just re opened.
Now Im on the hook for a large tax bill that came from the sale of the license.
I would get a “heavy” vehicle and use it mostly for work… ie deliveries, picking up product etc….
So to my understanding I would get 100% depreciation in this year (or as much as I use it for business over 50%)
Is this something wise to do vs just giving the government a massive check at the end of the year?
What would happen to the vehicle if I sell the store?
Would after 5 years the vehicle be devalued enough that I could just keep for personal use?
I know I’m not adding much to the convo with this comment but a Certified CPA should certainly know this. Hell I know this and I stapled taxes together and called people to pick them up 20 years ago lol.
With all due respect that isn’t how this works. You pay a CPA for their knowledge and guidance. No need for you to do your own research and come up with your own tax strategy to run past your CPA. Your CPA should do all the work for you.
Sec 179 isn’t something that a CPA should be unfamiliar with…
It’s not just a niche vehicle thing, it’s used for a variety of property deductions. So yes - do find a new CPA, we’re not trying to be rude but to be blunt if this is a business purchase, are you sure they are handling your business in the correct way and proper manner?
I am not your accountant - take all the good advice here and find a new one now
Is this a Federal or State tax bill you owe? Current annual rate and projected from this (as a % of income and total taxes).
If and only if this is a Federal tax liability, you might benefit from Sec 179 and Accelerated depreciation. You have until 12/31 to find a new accountant and transact on something like a 179 vehicle purchase, so don’t rush into anything. You have until 4/15/2023 to take advantage of other tax avoidance strategies: IRA/ROTH contributions for 2022, ROTH IRA conversations of pre-tax retirement assets, etc.
If it’s state tax you owe some/most, Section 179 won’t help you.
Your CPA and FP should have advised you on all of this before you sold the old license. Good on you to cash out, time for a team that can play ball at your level.
If my accountant couldn’t provide guidance on a simple question about S179 and/or reducing tax burden, my next stop would be Google to find a new CPA…not Leasehackr for questionable guidance.
I believe you’d owe back the depreciated amount deduction at the standard straight line 20% per annum. So if you sell in year two you need to repay the 80% deduction since you took 100% but entitled to 20%. It’s just an acceleration of a 5 yr straight line.
After 5 years it’s depreciated to zero then you pay capital gains on what you sold it for. If you sell it to yourself or an insider you risk an audit if the sales amount differs greatly from book value. Just cause the tax code allows you to depreciate it entirely in 5 years does not mean the IRS will believe it is actually valued at zero.
ASK YOUR ACCOUNTANT but section 179 has a recapture that is indefinite when you go sell your vehicle…there is no depreciation scale because you took 100% of the deprecation in year 1.
$100k vehicle purchased ( or % business use but just to make it easy let’s assume 100% business use)
$100k claimed as business expense the year you bought it
let’s say after 5 years you sell it for $30k
that $30k (or % business use) will count as business income for you the year you sold it.
It’s not cap gains but ordinary income.
The idea of section 179 is to offset a banner year income with a huge expense
When you go sell it, most will try to do it in a much weaker income year so the business or person, depending how u file, will be in a lower tax bracket
There is no way your tax preparer is a CPA. If so, they are literally the worst in the country. You just told us your high school AP English teacher does not know their ABC’s. Go pay a great business CPA a lot of money for professional advice. Also, a great CPA is aggressive but legal. Never cautious or conservative. If they mention red flags fire them. It’s like a medical doctor not wanting to perform CPR to save your life due risk (red flag) of cracking your rib. Ribs do no good when your dead just as a business does no good if your volunteer to give all your money to the IRS.
