New Truck and S-Corp Incentives

[Gomez]

I'm in the market for a new truck. I am self-employed (S-Corp) working at a large pharmaceutical company in Hopewell, NJ. There are many other self-employed contractors here as well. During a meeting yesterday, I was speaking with someone that had just purchased a new truck. He told me there is an IRS plan that allows you to write the truck off in one year versus the usual five. The only caveat is the GVWR of the truck. He was not sure what the number was, but felt the smaller SUVs did not make the cut.

My accountant had advised me that I would be better off buying personally and reimbursing myself from the company. Primarily, he felt I would need to get business insurance on the truck, which would be much more costly than personal insurance. Also, if I were to use the vehicle for non-work related travel, my assets (house, Kubota, etc) would no longer be protected by the S-Corp.

I know my accountant is more on the conservative side. The other contractor I was speaking with told me his accountant is quite aggressive.

Any thoughts?

If the GVWR minimum means I need to get a diesel, that wouldn't be so bad. /forums/images/graemlins/cool.gif

 

[Docsknotinn]

I dont recall the weight rateing on this but I know my GMC 2500HD Diesel does not qualify but a hummer does. I think its over 8,000# ???? I tend to agree with the slightly more conservative accountant. I have used both styles in the past but I prefer to selectively choose just where I might be sticking my neck out. This is not one of the areas I would want to tread, just personal choice. If I had a vehicle that was used 100% for work that would be different. Our corp is set up a a S corp as well but with all the partners as employees of the corp and we each hold private stock. several years ago we started to use a seperate corporate CPA from our personal. Thats worked well for us but I think with partners our situation is slightly different. I have run the numbers on this several times and it winds up costing you money to do this over the saveings, Unless its the exact vehicle you were going to buy any how for 100 % commercial use and you are already buying commercial insurance. Lots of gray area for different views on this one though. Dave

 

[snowman]

see tax discussion here

Note that you are not self-employed if you are working for this S Corp; you are simply an employee of the S Corp.

Also, when you talk about your accountant saying that your personal assets would be exposed by driving a company truck, I don't think that's true. Insurance follows the vehicle. If the vehicle was owned and insured by the S Corp, and you were out driving one night while drunk and crashed, you could be personally sued and could possibly lose all of your personal assets, but it's not because you were driving a company truck.

It could actually be to your benefit, in a perverse sort of way. Suppose you were driving a truck owned and insured by your corporation and you got in an accident and hurt yourself. You could personally sue your S Corp, whereas you could not "sue yourself" if you owned the truck as an individual. While it sounds ridiculous, it has been done.

 

[Docsknotinn]

Thats always been my understanding as well. This is to our benefit so every time I apply for a little loan I am not sent through the commercial loan center or provideing my lender a P&L from X # of months, year end reports etc, etc. I am simply an employee. As far as sueing your self in Mi we have uninsured motorist coverage that allows you to essentially sue your self if the other driver causes you bodily injury and they have no insurance, Although I cant even begin to imagine the legal fees involved in sueing your own ins co. Just another ploy from Big corp and govt to squeeeeze more ins money out of us. Just my humble opinion. Dave

 

[Gomez]

Thanks Dave and Snowman.

Some of the articles I've found say it's 6000#. SUV Tax Loophole

Snowman, your link didn't work for me.

I'm sorry if I misspoke (or is it mistyped?). I am the S-Corp president/owner/whatever with no employees.

 

[Docsknotinn]

You might want to discuss that with your advisors. It would probably be very much to your advantage in limiting liability etc to be the employee of your own corp. You just hold X shares of private stock. So What diesel are you looking at ???? Dave

 

[jwstewar]

</font><font color="blue" class="small">( As far as sueing your self in Mi we have uninsured motorist coverage that allows you to essentially sue your self if the other driver causes you bodily injury and they have no insurance, Although I cant even begin to imagine the legal fees involved in sueing your own ins co. )</font>

I don't know either, but I'll let you know as we are doing that right now or I should say will be doing that. My wife was the meat of a 3 car accident Nov. last year and she is still suffering from back pains. The guy had just gotten his license back for not having ins. Now he lost them (driving and not having ins.) and his wife lost them (for allowing someone to drive a vehicle in her w/o ins.). Has been a real PITA as our medical coverage for uninsured motorist is kinda low (as most people's is) so now we are having to use our health ins. and they are happy that they are having to pay for something that happened in an accident. Somehow they found out that we have a lawyer and contacted him. Anything we get in our settlement works like this 1/3 to the lawyer (standard) and then we have to repay our health ins. company and we get the 75 cents left. /forums/images/graemlins/frown.gif

 

[Docsknotinn]

Sorry to hear about that. I keep pretty high limits but I think I only have like 40k in unisured motorist coverage. Did you have an investigator see if he owns anything ? I'd probably go after him personally as well. Even though he's insoloivent today he could be tomorrows lottery winner or heir to unknown amounts. Even if you never recover anything a judgement would allow you, I think to be able to deduct that amount on your taxes as a unisured loss. Might want to talk to your advisors about that. You could always do the personal litigation in small claims. I think the limit there is 2k, but it only costs about $75 with a process server. Hope it works out. Dave

 

[cowboydoc]

You can work it out however is best for your current year. If you need the deductions this year then you can take the whole thing. If you want to take part this year and part next year you can do that as well. The plan does allow you to take the whole price off of your current year tax liability. You would qualify with a 250 pickup as I know the towing is over 9000 on it. The smaller suv's, ie trailblazer, explorer, toyotas, etc. don't qualify but the Expedition, Yukon, etc. do.

Also it doesn't matter insurance wise what you do with regard to taxes. The only way it makes a difference is if you tell the insurance man it's used for business. Then he will put you in the high priced insurance.

As far as using the vehicle for personal use that is true. You will either need to be very careful about using it personally or divide it out on your tax return for % used for business and for personal.

 

[Gomez]

Dave,

Probably the PSD, sounds like the majority of bugs are worked out. /forums/images/graemlins/wink.gif

Actually, the only way I'd get the diesel is if the gasser does not meet the weight necessary for the incentive. A collegue of mine just bought a new Toyota Sequoia on the plan. I would think even the new F150 would make the cut.

The diesel is not necessary for my needs, just my wants. /forums/images/graemlins/grin.gif

I know I have a stack of shares in my company, and I thought I was the only employee of my company.