|
Posted by Paul Thomas, CPA on November 4, 2006, 10:35 pm
Please log in for more thread options
> I intend to set up a real estate llc. Since I anticipate I
> will make numerous trips to the property to meet potential
> tenants and for various business reasons, I think my car may
> qualify for a deduction. Here are my questions:
>
> 1) I am looking to buy another used car after the llc is set
> up. Can I deduct the used car for my business expenses? or
> only new car is deductable?
It doesn't matter if it's new or used, when you buy it, it's
"new" to the business.
Now, you can't deduct teh purchase price of the vehicle as
an expense, it gets depreciated (expensed) over a number of
years.
> 2) What items are eligible under this deduction? Car
> Depreciation, maintenance, or just a lump sum of $0.35/mile
> payable to me (the car owner)?
The mileage rate for 2007 was just released, and baring any
huricane in the gulf, it's going to be 48.5 cents per
business mile.
Your other option would be to deduct actual expenses and
depreciation. If you don't use that vehicle 100% for
business purposes, you will have to prorate the expenses.
> 3) What evidence would IRS require me to show them that the
> car is used as business expense at a certain date and time?
A mileage log works best. You can get them for a few bucks
at Office Depot or the like.
> 4) Is there a better choice between Me VS The LLC as the
> owner of the used car? I heard if LLC is the owner, it
> would face more challanges in getting the financing.
Insurance is generally higher for a business owned vehicle.
There may be higher fees set by the state/county/city for
business licensing and permits, etc.
> Also, I will need to "re-imburse" the LLC for any
> personal use -- getting more complicated here?
Yup. You wouldn't reimburse the business, you would only
take the deductions based on a percentage of business miles
against total miles. The rest are non-deductible, and raise
your taxable income.
> 5) I also intends to spend some time at home to perform
> marketing work for the rental property. Therefore, can I
> also claim my home office as part of the deduction?
Home office deductions for rental property are a hard sell
in an audit. The rules for a home office are a defined
space that is used ~regularly~ and ~exclusively~. While you
can easily carve out something that looks like an office and
use it exclusively as an office, the "regularly" part is
questionable for rental activities that, what, maybe
requires opening a few envelopes with checks, and paying a
half dozen bills a month.
How many rental properties you have, and the actual amount
of time you will put toward this activity will determine if
you can claim a home office.
> 6) I heard that car deduction vary -- by weight (over 5
> ton), by luxury? I am looking to buy either a used lexus
> sedan, or a used camry. Unless there is a good reason to buy
> large car, then I may consider a minivan.
The lexus sedan, camery or mini-van will fall under the
regular vehicle rules for depreciation, and if you broach
the "luxury" limits (a whopping $14,800) your depreciation
gets limited.
> 7) Will any of the above deduction scenarios be impacted if
> I were to contract the rental property to a property
> management company?
Yup. There isn't any huge need for an office if someone
else does the work, and the amount of travel would be much
less if you weren't "active" in the business. You also run
the risk of not being able to deduct losses (because you are
passive) in the rental activity.
Consult a local CPA or EA about your options on the vehicle
and home office as well as what and when you record income
and what are the deductible expenses for rental activities.
--
Paul Thomas, CPA
paulthomascpapc@bellsouth.net
<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>
| 
Yahoo! 
Google 
Windows Live 
del.icio.us 
digg 
Netscape 
XML Sitemap