If your business buys a car with a curb weight over 6000 pounds or a truck or SUV over 6000 pounds gross loaded vehicle weight (GVWR) in 2011, the luxury auto rules don’t apply to this vehicle. What does this mean? In 2011 you can deduct the following depreciation on a new car or truck:Car cost over $15300 with curb weight over 6000 lbs - all of it because of bonus depreciationCar cost over $15300 with curb weight under 6000 lbs - $11,060 (Luxury Auto Limits)Truck with GVWR over 6000 lbs - all of it because of bonus depreciationTruck with GVWR under 6000 lbs - $11,260 (Luxury Auto Limits)So if you are buying a car for business and you need something heavy-duty, make sure it is heavy!Tomorrow I will give a list of cars and trucks with Gross Vehicle Weight Rating (GVWR) over 6000 pounds.
Brian’s Tax Musings
See yesterday’s post about hobbies and their potential problems. Now how to turn you hobby into a business:1. Carry on the hobby in a business-like manner (you could have a separate checking account for your business, plus maybe register a dba and name your business.)2. You put time and energy into the business that shows you want to make it profitable.3. You need the money to live on (this by itself shows a for profit motive)4. Your losses are beyond your control or they are normal in startup phase of business (say the economy turned against you or you had computer problems).5. You or the advisors you use have the knowledge to carry on a successful business, It is just taking a little time.6. You have had some success in this activity before.The more of these items you do the better chance you have of having a business instead of a hobby. One more thing – The IRS looks for profit motive by seeing a profit in 3 out of 5 years, so it makes sense to have profitable years.
Brian’s Tax Musings
Sorry for no posts the last few days – was away doing some personal things and didn’t have time.Do you have a hobby that you receive money for but never make a profit (Avon, breeding animals, etc)? BEWARE! Under IRS regs any money you make on a hobby is taxable on the front of your return and any expenses you incurr are only deductible as miscellaneous itemized deductions, which are reduced by 2 percent of your income and can only be taken if you itemize, plus you can only deduct the same amount of expenses as the hobby income. This is a horrible situation – you are probably going to be paying tax on money you didn’t make.You have three choices:(1) Stop doing the hobby.(2) Turn it into a legitimate business so you can deduct all your expenses.(3) Continue the hobby but don’t receive any money for doing it so you dont have to claim it as income.(1) and (3) don’t need any explanation. Tomorrow I will talk a little about (2) and how to do it.