Model X

Hummer Tax Loophole

edited November -1 in Model X
Does anybody know how the Hummer Tax Loophole works for the model X? Or how to qualify for it?


  • edited May 2018
    Do a search for IRS 179 in the forums. It's been widely discussed.

    How to search the forums:
  • edited November -1
    It works great on the Model X.

    If you have a business, and you use your X for business purposes you can depreciate almost the entire cost the first year with a combination of first year bonus depreciation plus accelerated depreciation.

    You must use it at least 50% for your business and if audited need to have records to back it up.

    For business owners this makes the Model X by far the least expensive to buy.

    You can search section 179 SUV in Google.

    The reason that it qualifies is that the Gross Vehicle weight is over 6,500 lbs. The Gross Vehicle Weight is the vehicle curb weight plus the amount it can carry in passengers and cargo.
  • edited November -1
    Funny - someone just asked me and I wrote him a very detailed explanation. See below and if you want to reach me personally with any questions my email is hdhemmati at gmail dotcom:

    I was totally clueless about this 179 deduction business. Then my uncle did it and then I discovered some friends did it too. I hired a tax attorney to give me an official opinion (paid her $150 for 30 min time on phone) so that I would have this documented and protect myself in case of issues down the line and prove that I did my diligence on it.

    Basically, under the new Trump tax plan (Effective late September 2017), you get to deduct up to 100% of the Model X value off your taxes as a proportion of its BUSINESS use in the year you buy it without needing to depreciate over several years as before. For example, say you buy a Model X in May, and you use it 75% for professional work (consulting, wedding photographer, private doc, whatever you do) and 25% personal, and the car cost $100k including tax, you deduct $75k off your federal taxes (and an appropriate proportion off state based on your state rules - you have to depreciate the state component over 5 years in my state of CA) -- you might report a loss but that way you get $$ back year of the following years. The business:personal ratio has to be DOCUMENTED and believable and must exceed 50% to trigger. You can't say easily 100% unless you did what I did: I bought it 2nd to last week of December. I kept my old car until Jan 2. I drove the X ONLY for business and then left it alone in my garage until Jan 1. That way, I got to say 100% business! $100k car, after tax, ended up costing me $50k. Not bad, eh? You MUST have documentation in the form of a mileage log (handwritten) ideally supported by odometer readings using Tesla Service records. The IRS can (and often does) request the documentation at audit time.

    Math was as follows:
    Car after tax: $100,000
    Section 179 Deduction: $25,000 (heavy vehicles only)
    100% bonus depreciation: $100,000-$25,000 = $75,000 (new Trump tax plan effective late September 2017 and beyond; previously it was 50% bonus, which meant $37500, not $75,000)
    Total write-off from federal taxes: $25,000 + $75,000 = $100,000 (100% of the car)
    The key, therefore, is to keep business use to a maximum level in 2018 so you get the maximal deduction upfront.

    I do my own taxes btw... This was relatively easy to do in TurboTax but some accountants aren’t yet up to speed on the Trump tax changes. You can get a loan and pay the loan off over time, but take the tax deduction RIGHT away. So I have a loan from tesla at 1.49% interest and I deduct the interest as well!! But the PRINCIPAL (the cost of the car + tax) got written off immediately!

    Moreover, through all/most of 2018 you'll get $7500 off your taxes from federal government for having an EV, ON TOP of the 100% immediate tax deduction, making it even cheaper. That is on top of any state and local incentives you might be eligible for ($2500 from CA state and $500 from LA City for us). And if you order through a referral link from an existing Tesla owner, you get free lifetime supercharging access. :)

    Happy to discuss with anyone here in more depth -- all this depends on your tax situation etc so might be worthwhile confirming with accountant (if you have one) re your personal situation before taking the plunge. For what it's worth, I'm VERY happy I did! You'll LOVE your car as well. A lot of people on Tesla forums and TMC bent over backwards to help me make purchase decisions (battery, colors, options, etc) and I'm always available to help you make your decisions as well.

    Good luck!

  • edited May 2018
    @MelaniaFromBrentwood - well said. But we wonder why governments have such an enormous deficit?
  • 3Gs3Gs
    edited May 2018
    @MelaniafromBrentwood - I am about to file my taxes and know for a fact that my tax preparer is not too up to snuff on Sec 179. The 100% deduction applies if he vehicle was PURCHASED or PUT TO USE on Sep. 27? Reason it's important to me is I bought my X on Sep 20 but was not really available for much use, business or personal since I had to bring it in to the SC for minor maintenance issues 2 days after pickup. Thanks in advance.
  • edited November -1
    @3Gs yes the rule is that the vehicle had to be “put into service” September 27 2017 or later. Since you took possession and drove it, it might be hard to make the argument that it wasn’t put into service because of “minor” maintenance issues. That said, had the car been undrivable due to major issues, I could see that argument being made. But in the end if you’re audited the IRS will ask for documentation. Err on the side of legal — not worth handcuffs or a big fine to deduct an extra fee $$ today versus spread over the next few years...
  • 3Gs3Gs
    edited May 2018
    @MelaniaFrom Brentwood - Point well taken. I guess I was interpreting "date put in service" to mean "date started using for the business". I agree with you totally. I'm happy to be able to deduct the pre-trump tax law depreciation.

    Thank you.
  • edited October 2018
    @MelaniaFromBrentwood I just purchased a model X under my business and would love to go over how the deduction works. Please shoot me an email at [email protected] THANK YOU!
  • edited October 2018
    I want to add another thing that you should know when purchasing an MX for business (S-Corp in my case specifically). The $7500 federal tax credit flows through as a General Business Credit and whether you get that amount is based on your business profit and is subject to the Alternative Minimum Tax (AMT). Let's use me as an example. I used the MX at 97% business and 3% personal in 2017. 3% of $7500 is $225 in personal which is not subject to AMT and I got the full $225. The 97% business which is $7275 is subject to AMT and because I was subject to AMT, I could not get any of the $7275. It instead will get carried from year to year for 20 years unless I don't get hit with AMT. I've always been hit with AMT though so I don't foresee me ever getting that credit. Hopefully with the new tax law I will get some of that credit but I'm doubtful. Keep that in mind in your calculations.
    In addition, you need to know that you must subtract the $7500 from your purchase price before doing Section 179, otherwise you're double-dipping and will get penalized. The state rebate typically is considered income so you must add that amount to your income to be taxed.

    Check with your CPA before making a decision. The 6000-lb Heavy SUV writeoff is good, just not that good regarding the federal credit.
  • edited October 2018
    I am planning a 50% tax credit on my MX
  • edited October 2018
    AMT has changed significantly starting in 2018.
  • @MelaniaFromBrentwood can you please email me the info for the hummer tax deduction?
  • > @th2os said:
    > @MelaniaFromBrentwood can you please email me the info for the hummer tax deduction? my email is: [email protected]

Sign In or Register to comment.