USA Section 168 bonus depreciation for a TESLA Model X

[James1234]

Hi

I am a self employed individual (real estate broker). I am thinking of acquiring a TESLA Model X (used) before the end of the year.
I understand under the IRS section 168, we can depreciate 100% of the purchase price. I am filing Section C, as a sole proprietor.
Please advise whether this is a correct assumption ?
I would appreciate getting in touch with a CPA who is in California, preferably in Sacramento area

Thank you so much

 

[DrStrangeLove]

There might be a problem if you're driving the Tesla for personal use as well as for business use. Even if you're filing a Schedule C with your 1040, the amount you can depreciate is going to depend on how much you drive the Tesla for business uses vs. non-business uses. IRC 168(k)(2)(F) requires coordination with IRC 280F, and IRC 280F(b)(2) is going to recapture any bonus depreciation if your Tesla is used for business use less than 50% of the time it's used during the tax year. This is a problem in general for mixed-use (business vs. personal) assets.

So if for any year in the first 5 years you own that Tesla you drive it for person use more than you drive it for business use, you're going to get a fat tax bill when the recapture provision in IRC 280F(b)(2) kicks in. I don't know how much that Tesla is going to cost you; I've never looked at Tesla prices. I'm assuming it meets the definition of a luxury car, and so the depreciation you can deduct is limited by IRC 280F(a). But this sounds like a case of "possible but unwise", and that depreciating it under the normal rules may be the wiser course.

The standard exclusions apply: This is not a professional opinion, and should not be relied upon. You assume all risks should you act on what I've said above, RNT, YMMV, IANAL and all that.