Auto Rules from a Tax Perspective - Mini Course (Course Id 949)

Taxes - Taxes for Course Id 949

Operating costs for vehicles used in the course of a taxpayer’s business are deductible. Thus, when taxpayers use their vehicles in their businesses or employment, they can deduct that portion of the cost of operating their vehicle. Such costs that can be deducted are property taxes that are paid on their vehicle if deductions are itemized on Schedule A. This mini-course reviews the apportionment of personal and business use, the actual cost method, the standard mileage method, and expensing. Moreover, this presentation informs practitioners about topics such as the benefits and costs of leasing versus owning, and working condition fringe benefits.

NASBA QAS - Text - NASBA Registry - IRS Enrolled Agents - 949

As a result of studying the assigned materials, you should be able to meet the objectives listed below.

At the start of the materials, participants should identify the following topics for study:
* Apportionment of personal & business use
* Deduction limitations using the actual cost method
* Expensing - 179
* Predominate business use rule
* Auto leasing
* Standard mileage method
* Auto trade-in vs. sale
* Employer-provided automobile
* Nonpersonal use vehicle
* Reporting of an employer-provided automobile

After reading the materials, participants will be able to:
1. Recognize tax vehicle depreciation (§168) and expensing (§179) methods including their requirements and limitations under MACRS and recognize basis, business use, and deduction computations.
2. Specify the predominate business use rule recognizing the result of less than 50% qualified business use, cite the pros and cons of auto leasing, and determine how to estimate monthly lease payments indicating what factors affect payments so clients may recognize leasing costs and know common leasing terms.
3. Identify items included under the standard mileage method listing items that may be separately deducted, determine the taxable fringe benefit value of an employer-provided automobile using the general and special valuation methods and specify several qualified nonpersonal use vehicles stating what reporting standards apply.

Chapter 1 - Auto Rules

Apportionment of Personal & Business Use

Car Pool

Fines

Parking Fees

Interest Deduction Limit for Individuals

Self-Employed Exception

Property Taxes

Sales Taxes

Former Sales Tax Deduction for Qualified Vehicles (Expired) - §164

Actual Cost Method

Deduction Limitations

Definition of Car

Depreciation & Expensing

Basis

Trade-In of Old Car for New

Placed in Service

Conversion to Business Use - “Lesser of” Rule

MACRS - 5 (Actually 6) Years

200% Double Declining Balance Method

150% Declining Balance Method Election

Straight-Line Method Election

Half-Year Convention

Mid-Quarter Convention

Depreciation “Caps” - §280F(a)

Passenger Auto Depreciation Safe Harbor Method - R.P. 2019-13

No Separate Depreciation Caps for Trucks & Vans

Post-Recovery Period Depreciation - Max Reduction Rule

Partial Business Use

Improvements

Bonus (or Additional First-year) Depreciation - §168(k)

Expensing - §179

Cost of Car

Basis Reduction

Making the §179 Election

Business Use Reduction

SUV Limitation

Predominate Business (More Than 50%) Use Rule

Qualified Business Use

Exclusions

Change From Personal to Business Use

Employee Use of Their Own Car

Failure to Meet Predominate Business Use Rule

Later Reduction in Qualified Use

ITC Recapture - Highly Unlikely

Straight-line Depreciation

Excess Depreciation Recapture

Short Tax Year Depreciation Reduction

Auto Leasing

Pros & Cons

Leasing Terminology

Closed-End vs. Open-End Lease

Formula for Monthly Payments

Leasing Deduction Restrictions

Income Inclusion Amount

Separate Lease Inclusion Table for Trucks & Vans

Cars Leased For 30 Days or More After 1986

Computation of Inclusion

Nine-Month Following Year Rule

Buying v. Leasing

Standard Mileage Method

Limitations on Standard Mileage Method

Use, Ownership & Prior Depreciation

Switching Methods

Charitable Transportation

Medical Transportation

Auto Trade-In vs. Sale

Working Condition Fringe Benefits

Qualified Transportation - §132(f)

Employer-Provided Automobile

General Hypothetical Valuation Method

Special Method #1 - Lease Value

Annual Lease Value - For Entire Calendar Year

Fair Market Value

Safe Harbor Value

Items Included in Annual Lease Value Table

Prorated Annual Lease Value - For 30 Days or More

Daily Lease Value - For Less Than 30 Days

Optional Fleet-Average Valuation Rule (FAVR)

Special Method #2 - Cents per Mile

Regular Use - 50% Business

Mileage Rule - 10,000 Miles

Items Included In Cents-Per-Mile Rate

Special Method #3 - Commuting Value

Control Employee

Employer-Provided Transportation in Unsafe Areas

Qualified Employee

Nonpersonal Use Vehicles - 100% Excludable

Clearly Marked Police or Fire Vehicles

Unmarked Law Enforcement Vehicles

Law Enforcement Officer

Trucks & Vans

Pickup Truck Guidelines

Van Guidelines

Qualified Automobile Demonstration Use

Full-time Automobile Salesperson

Restrictions on Personal Use

Reporting by Employer

Election Not to Withhold for Income Taxes

Value Reported

Accounting Period

Special Accounting Period - Pour Over Method

Glossary