Just picked up my 35d

[ABMW]

Not belligerent at all, sorry if it came across that way. It was not my intent. Emotions are lost via Internet forums. I'm just having fun participating.

No, the total taxable income I received was FAR in excess of $45k. It was not a bonus, but an unexpected deal that closed, with little to no notice. Person A called me one day and purchased B's home the next for many millions of dollars. The $45k is my actual tax savings. To answer your other question: yes I am incorporated, so I draw a salary from my incorporation. It's very complex and a pain, but it's also the correct way to handle one's finances if you can stomach the paperwork and specific filings. I hate it, but it does save me money at the end of the day.

The car need not be purchased under one's corporate name to qualify, nor must it be insured under the corporation or purchase in call cash. Financing the vehicle is fine.

In the case of a luxury vehicle they may also require justification as to why you needed a luxury vehicle instead of a Jeep Cherokee.

I sell and assist buyers in their purchase of homes in excess of $3m+ (almost exclusively), so it's easy to see how I can't exactly toss my clients into the back of a Ford Escape, when they drive up in a 911 Turbo. It just won't work.

Again, check with your accountant. No need to purchase under the corporate name or have it insured as such, any more than you'd need to purchase a Herman Millar chair under your corporate name. It's filed as a 179 Section deduction, and it's been available for years.

It's very standard. The only difference this year, compared to past years is the "bonus depreciation" which doubles what was previously allowed to be depreciated (deducted). The old limit was $25 or $28k I don't recall exactly. The new limit is $58k for SUVs with GVWR of 6,000 lbs. or higher and $250k for other equipment such as airplanes or farm equipment. For example the X3 won't qualify, as it's too light. It is part of the stimulus package that was put in place to spur American Car buyers to purchase SUVs from Ford and Dodge, etc, that were sitting on the lot. Unfortunately didn't work all that well. Bush did something similar, which caused a rash of small business owners to purchase Hummers H2s. I'm sure you've read about it in the past.

I'm a real estate broker, but I'm in the top 99.99% of my field, so driving an X5 is very acceptable to the govt. If I were selling $120k homes, it "could be" a bit difficult to justify why I need an X5 Diesel.

Hope that helps, and I again, I wasn't being belligerent hence my "friendly" advice comment, that you seek the same situation for yourself. It can work in your favor, assuming you're in a similar boat.

If I can forward you to my accountant, contact me anytime. He works in Los Angeles, but takes clients all over the country and will talk to you for hours for free. He's a good guy and knows his stuff. But, I am always careful to double check, and fortunately reading tax code is a strange hobby of mine. Guess everyone needs one ;-)

PM me if you need any help with it. I can send you to the IRS publications that are of importance to this particular scenario.

Best...

[ABMW]

Originally Posted by bigx5er

I get why you wanted to grab your tax savings, but I still find it odd that you didn't walk if the sales manager was that miserable. There are many dealers out there who are all anxious to sell X5s (if they have them).

Your math on the tax savings has me scratching my head like the previous poster. You are talking about a section 179 deduction. Or in other terms, accelerated depreciation. If you are having a good year, accelerated depreciation can be a good thing. But where I don't follow you is that deductions are against income, so even if you could deduct 100% of the purchase price, you would end up around 20K in a 36% bracket. To get to 45K would mean you were in a 80% bracket. The 6000 GVWR merely gets you by a federal limit on business car expenses, it has nothing to do with the current 2009 accelerated depreciation rules.

If there is some other creative way to handle the taxes, I would be interested to learn it. You would be best to site the rules online somewhere instead of just telling people to keep calling until they get the answer they want.

We look at section 179 each year. For you tax fans, here is a good reference:

Qualifying for the 2008 Section 179 Tax Deduction | Section179.org

I'm fine with calling a spade a spade, but something smells fishy here (and note I only have around 200 posts)

My income is substantially higher than $45k. That is the confusion you all are confusing, I believe. Magnify it by many magnitudes. I also file jointly with my wife.

Thus, a $65 to $70k deduction at my tax rate of 56% helps me a great deal.

33% federal Tax Rate + 15% self - Employment Tax Rate + 9% CA Tax.

My total income is in the mid 6-figures when combined with my wife's. The $65 to $70k deduction doesn't really toss us into a lower tax bracket, but it helps with not having to pay taxes on that amount of income at my tax rate.

In other words, as a hypothetical example: Imagine I made $100k. I purchased a vehicle for $70k for business that allowed me to deduct the full 100% (or depreciate the full 100% the first year-2009). My effective income then drops to $30k. My tax rate on 30k, due to my wife's income is still 50%.

The math works well. I'm displaying the above as a hypothetical example to assist others, as I know there are many in the same boat as am I.

If it's complicated, that's the point. IRS code is not fun, but it helps to be married to one who's a smart gal with a certain advanced degree that everyone loves to hate. You all can figure out what degree that is, I'm sure. But, for the record, she hates it to, so don't let your kids ever take the LSAT and as a final note, the figures are 100% correct for MY situation.

If you're coming up with differing figures, your math or interpretation is incorrect, but I can refer you to a very good individual who can assist.

Really, I'd like to help, so don't hesitate to PM me on this matter. If you use your X5 for business, and you bought it new this year, I strongly encourage you to at least investigate the option of accelerated bonus depreciation that's available to you.

Best

[ABMW]

P.S. the link you posted was to the 2008 179 deduction.

It changed DRAMATICALLY in 2009. 2008 has no relevance to 2009, whatsoever, in terms of this particular subject.

Just FYI.

But, I'm not an accountant, I leave that to the pros, so I think I've said my peace. If anyone wants to connect with a great accountant and you run your own business 100%, I'd be happy to assist you.

Nothing to gain here, beyond a simple good deed.

[bigx5er]

Originally Posted by ABMW

My income is substantially higher than $45k. That is the confusion you all are confusing, I believe. Magnify it by many magnitudes. I also file jointly with my wife.

Thus, a $65 to $70k deduction at my tax rate of 56% helps me a great deal.

33% federal Tax Rate + 15% self - Employment Tax Rate + 9% CA Tax.

My total income is in the mid 6-figures when combined with my wife's. The $65 to $70k deduction doesn't really toss us into a lower tax bracket, but it helps with not having to pay taxes on that amount of income at my tax rate.

In other words, as a hypothetical example: Imagine I made $100k. I purchased a vehicle for $70k for business that allowed me to deduct the full 100% (or depreciate the full 100% the first year-2009). My effective income then drops to $30k. My tax rate on 30k, due to my wife's income is still 50%.

The math works well. I'm displaying the above as a hypothetical example to assist others, as I know there are many in the same boat as am I.

If it's complicated, that's the point. IRS code is not fun, but it helps to be married to one who's a smart gal with a certain advanced degree that everyone loves to hate. You all can figure out what degree that is, I'm sure. But, for the record, she hates it to, so don't let your kids ever take the LSAT and as a final note, the figures are 100% correct for MY situation.

If you're coming up with differing figures, your math or interpretation is incorrect, but I can refer you to a very good individual who can assist.

Really, I'd like to help, so don't hesitate to PM me on this matter. If you use your X5 for business, and you bought it new this year, I strongly encourage you to at least investigate the option of accelerated bonus depreciation that's available to you.

Best

So you have an effective rate of 56%. That part makes sense to me. You still can't get to a 45K deduction, no matter what math you use. Even at 100% of a 62K SUV, you still land at 34K (and you can't do it at 100%)

You would have maxed out on social security already, that is 12.4% on your self-employment tax. So no savings there. Medicare at 2.9% is not impacted by deductions, it's straight off the income line. So that lowers your effective rate to 42%.

Once you maxout on the brackets, your income doesn't matter. I'll guess most people in this forum make some decent money if they are buying X5s.

[bigx5er]

Originally Posted by ABMW

P.S. the link you posted was to the 2008 179 deduction.

It changed DRAMATICALLY in 2009. 2008 has no relevance to 2009, whatsoever, in terms of this particular subject.

Just FYI.

But, I'm not an accountant, I leave that to the pros, so I think I've said my peace. If anyone wants to connect with a great accountant and you run your own business 100%, I'd be happy to assist you.

Nothing to gain here, beyond a simple good deed.

Read the entire page, 2009 is at the bottom. Accelerated depreciation is a general accounting concept. 2009 was an extension of the 2008 changes. See the first page Section 179 Tax Deductions for 2009 | Section179.org

[z2g]

ABMW,
Odd....I've spoken to my CPA and other ppl. They've all mentioned that for business auto purchases, the car has to be insured as a commercial vehicle under the business name. One of those ppl is also my insurance agent.

So, I don't know what's going on.

[corima]

Originally Posted by ard

Sorry to hear of this.

Of course you should not have shared YOUR personal details that gave them all the leverage...even if it WAS to be a business purchase, just do that at the closing.

I'd have been calling every dealer in a 200 mile radius with some story of 'surprise my wife for christmas' and offering some hefty premium over invoice (but not full MSRP)

If I could have saved $100 over their price, I'd have driven 100 miles to do it. They could have thrown you a bone and didn't. F em.

I paid 1k profit at Pleasanton... I was shocked, frankly.

Chico would be a good place to try

A

Ding, Ding, Ding. We have a winner. Dude! Never give the dealer sales people the kind of information you did. NEVER! Never the less. Nice car.

[Quicksilver]

Don't forget the 2009 tax credit. ( If you qualify)
2009 New Car Tax Credit

Don't forget your BMW CAR CLUB OF AMERICA rebate.
(You did join correct?)

[ABMW]

Originally Posted by bigx5er

So you have an effective rate of 56%. That part makes sense to me. You still can't get to a 45K deduction, no matter what math you use. Even at 100% of a 62K SUV, you still land at 34K (and you can't do it at 100%)

You would have maxed out on social security already, that is 12.4% on your self-employment tax. So no savings there. Medicare at 2.9% is not impacted by deductions, it's straight off the income line. So that lowers your effective rate to 42%.

Once you maxout on the brackets, your income doesn't matter. I'll guess most people in this forum make some decent money if they are buying X5s.

It's probably unwise to give financial advice here, as I'm not an accountant. But, in short, if you want to know how it's derived you can always PM me.

I don't agree with you assessment that most X5 owners make decent money. I can't tell you how many dozens and dozens of credit reports I've looked over this year alone, that show insane incomes of $45 to $50k, with zero savings, and $1,500 per month car payments.

In 2009, the largest savings I saw for any individual under the age of 30, was around $20k. That person drove a high-end german automobile and earned about $70k.

Yes, people on this board probably make more than those on Jeep boards, but I think you'd be surprised to see what most people actually take home.

In my professional experience there is little correlation with the car one drives and the income one earns.

Just what I've seen....

But, everyone has their own opinions, naturally.

Cheers.

[Armand]

Originally Posted by ABMW

It's probably unwise to give financial advice here, as I'm not an accountant. But, in short, if you want to know how it's derived you can always PM me.

I don't agree with you assessment that most X5 owners make decent money. I can't tell you how many dozens and dozens of credit reports I've looked over this year alone, that show insane incomes of $45 to $50k, with zero savings, and $1,500 per month car payments.

In 2009, the largest savings I saw for any individual under the age of 30, was around $20k. That person drove a high-end german automobile and earned about $70k.

Yes, people on this board probably make more than those on Jeep boards, but I think you'd be surprised to see what most people actually take home.

In my professional experience there is little correlation with the car one drives and the income one earns.

Just what I've seen....

But, everyone has their own opinions, naturally.

Cheers.

Incomes aside, ABMW did a very clever thing. The law allows him to deduct the entire cost of his vehicle over a few years. You could not do it if the special depreciation did not exist for 2009. Frankly, I am surprised he was complaining about paying MSRP. He will save much much more in business tax deduction. The law expires on 12/31 unless of course it is extended...