Electric Car as a Business Expense

Tax, SDIRAs & Cost Segregation
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Electric Car as a Business Expense

Joe SplitrockPro Member
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Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes

We are in a situation where my wife is soon to be quitting her job to focus more on the rental business. My daughter will be getting her drivers license this year, so we will need to add a third car. We could probably get by with two cars, accept the rental properties mean we need a third car for situations where I am at work, my daughter is at school and something needs to be done at a rental property. We have been claiming mileage and put on about 2500 miles last year for rentals. We are looking to buy a new car that will be under 6000 pounds. We want to expense the new car against the rental business, but I have some questions and looking for advice. I understand I need to discuss with my CPA. I am just trying to get educated and multiple opinions:

1. New vehicle will be $60,000 but with $7500 federal tax credit for electric. What is the best method to depreciate and how does that work per year? Any bonus depreciation or good strategies here?

2. We will use the car for 60-75% business and the rest personal. Is it correct that I just prorate based on percentage use? Is that done with all expenses at the same ratio? How about if your split between business and personal changes every year, can you adjust each year or are you stuck into a set percentage?

3. If I finance versus pay cash, can I claim interest expense? 

4. Can I claim sales tax in the year I purchase? 

5. It is electric, so no gas bill to claim. I can claim expenses on billable chargers pretty easily, but how do I claim home electric use? Do I just calculate split based on KW charging hours and keep some records of my bills to substantiate?

6. Can I expense license plate/registration and insurance? 

7. Should the vehicle registration be in the business name or personal or does it not matter for tax purposes?

8. We drive 2500 per year for the business, so is that substantial enough to justify a car? Do I need to keep any type of mileage records similar to what I am keeping right now when claiming mileage deduction?

9. If we chose to continue claiming just mileage, are there other expenses I can still claim? Vehicle registration, insurance, sales tax, etc OR does mileage mean ALL expenses are part of that?

@Natalie Kolodij @Michael Plaks @Ashish Acharya  and any other BP tax experts, please share your advice.

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    4y
    answer from the cheap seats and someone who has written off their vehicle for work for the last 47 years  at least for me if you use milage that's all you need to do it encompasses all those items you list.

    but I routinely drove 20 to 30k miles a year schlepping clients around and running up into the boonies to show rural acreages. 

    so the itemized approach is probably what you want to do and keep a log book that you can pop out if your audited..  

    As for the federal tax credit that is just what is says a 7500 off of your tax bill ..   and some states ( like Oregon also cut you a check we are getting 2500.00 for Lori's new model Y)  But Tesla I don't think qualifies anymore for the 7500.00 unless Biden gets his BBAB passed which is looking pretty unlikely from what I read on the news.  

    As for writing off your charging at home..  If what ever vehicle you buy is like our Tesla's  you can pre set the time to start charging we set ours for 10pm because the electricity rate in our area drops from 12cents a kilowatt 4 cents and we usually fill up with 50 Kilowatts or 2.oo for a full fill up and 300 or so miles of range which is really 250 miles of range as you lose range based on driving habits and how cold it is and if your driving in mountainous areas. 

    so at that point you should be able to just put a copy of your electric bill in your file and highlight the increased usage from 10pm till 2 to 4 am whcn you fully charged.. Now Tesla's charge fast not sure how fast other brands charge.. And the supercharger network is the envy of the every EV owner. 

    The model X qualifies for the bonus depreciation that's what I drive.  And so will the cybertruck no doubt and when that comes in I will buy a new one of those and trade in my Y.. 


    EV vehicles for your mission are perfect I bet you will really like it. 
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  • Joe SplitrockPro Member
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    Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
    4y
    Quote from @Jay Hinrichs:
    answer from the cheap seats and someone who has written off their vehicle for work for the last 47 years  at least for me if you use milage that's all you need to do it encompasses all those items you list.

    but I routinely drove 20 to 30k miles a year schlepping clients around and running up into the boonies to show rural acreages. 

    so the itemized approach is probably what you want to do and keep a log book that you can pop out if your audited..  

    As for the federal tax credit that is just what is says a 7500 off of your tax bill ..   and some states ( like Oregon also cut you a check we are getting 2500.00 for Lori's new model Y)  But Tesla I don't think qualifies anymore for the 7500.00 unless Biden gets his BBAB passed which is looking pretty unlikely from what I read on the news.  

    As for writing off your charging at home..  If what ever vehicle you buy is like our Tesla's  you can pre set the time to start charging we set ours for 10pm because the electricity rate in our area drops from 12cents a kilowatt 4 cents and we usually fill up with 50 Kilowatts or 2.oo for a full fill up and 300 or so miles of range which is really 250 miles of range as you lose range based on driving habits and how cold it is and if your driving in mountainous areas. 

    so at that point you should be able to just put a copy of your electric bill in your file and highlight the increased usage from 10pm till 2 to 4 am whcn you fully charged.. Now Tesla's charge fast not sure how fast other brands charge.. And the supercharger network is the envy of the every EV owner. 

    The model X qualifies for the bonus depreciation that's what I drive.  And so will the cybertruck no doubt and when that comes in I will buy a new one of those and trade in my Y.. 


    EV vehicles for your mission are perfect I bet you will really like it. 

     Thanks Jay! I wanted a Cybertruck, but with the number of pre orders, it could take years to get one. We preordered a Kia EV6, which is meant to compete with the Model Y. We went that route for several reasons. They still have the tax credit, have a 10 year warranty on the battery/motors, have a local dealership for service and we have a Kia Telluride that we are very happy with. No super charger network is a downside, but electric charging networks will grow quickly in the next couple years. There is enough range that we will rarely use a charging network. Your comments over the years have definitely helped sell me on electric cars. 

    Unfortunately we don't have time based electrical rates, so it is the same at day or night. They are looking to roll it out in the next year, so I will definitely take advantage of lower night rates.

    I think it is insane that Biden hasn't worked with congress to extend new credits for Tesla. He seems to hate Tesla, which is BS considering Tesla has lead the world in EV innovation and employs tons of American workers. I read an article that Biden said the word Tesla for the first time since taking office just yesterday! Build back better plans have tax credits, although the Tesla ones are lower than for GM or Ford. They also have money for electric charging networks. All good if congress can work together and pass something.

    Do you actually purchase/lease/finance your vehicles through your business? How do you handle the personal use percentage or do you just use it enough for business that you don't worry about it?

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    4y
    Quote from @Joe Splitrock:
    Quote from @Jay Hinrichs:
    answer from the cheap seats and someone who has written off their vehicle for work for the last 47 years  at least for me if you use milage that's all you need to do it encompasses all those items you list.

    but I routinely drove 20 to 30k miles a year schlepping clients around and running up into the boonies to show rural acreages. 

    so the itemized approach is probably what you want to do and keep a log book that you can pop out if your audited..  

    As for the federal tax credit that is just what is says a 7500 off of your tax bill ..   and some states ( like Oregon also cut you a check we are getting 2500.00 for Lori's new model Y)  But Tesla I don't think qualifies anymore for the 7500.00 unless Biden gets his BBAB passed which is looking pretty unlikely from what I read on the news.  

    As for writing off your charging at home..  If what ever vehicle you buy is like our Tesla's  you can pre set the time to start charging we set ours for 10pm because the electricity rate in our area drops from 12cents a kilowatt 4 cents and we usually fill up with 50 Kilowatts or 2.oo for a full fill up and 300 or so miles of range which is really 250 miles of range as you lose range based on driving habits and how cold it is and if your driving in mountainous areas. 

    so at that point you should be able to just put a copy of your electric bill in your file and highlight the increased usage from 10pm till 2 to 4 am whcn you fully charged.. Now Tesla's charge fast not sure how fast other brands charge.. And the supercharger network is the envy of the every EV owner. 

    The model X qualifies for the bonus depreciation that's what I drive.  And so will the cybertruck no doubt and when that comes in I will buy a new one of those and trade in my Y.. 


    EV vehicles for your mission are perfect I bet you will really like it. 

     Thanks Jay! I wanted a Cybertruck, but with the number of pre orders, it could take years to get one. We preordered a Kia EV6, which is meant to compete with the Model Y. We went that route for several reasons. They still have the tax credit, have a 10 year warranty on the battery/motors, have a local dealership for service and we have a Kia Telluride that we are very happy with. No super charger network is a downside, but electric charging networks will grow quickly in the next couple years. There is enough range that we will rarely use a charging network. Your comments over the years have definitely helped sell me on electric cars. 

    Unfortunately we don't have time based electrical rates, so it is the same at day or night. They are looking to roll it out in the next year, so I will definitely take advantage of lower night rates.

    I think it is insane that Biden hasn't worked with congress to extend new credits for Tesla. He seems to hate Tesla, which is BS considering Tesla has lead the world in EV innovation and employs tons of American workers. I read an article that Biden said the word Tesla for the first time since taking office just yesterday! Build back better plans have tax credits, although the Tesla ones are lower than for GM or Ford. They also have money for electric charging networks. All good if congress can work together and pass something.

    Do you actually purchase/lease/finance your vehicles through your business? How do you handle the personal use percentage or do you just use it enough for business that you don't worry about it?

    our LLC owns the vehicles my wife is more than full time realtor and I am 1000% time involved in all my real estate activities..  I got audited for my airplane as I was writing a big portion of that off and the bonus depreciation up front on airplane is staggeringly beneficial at the time..  My partner in it is in the underground construction development business with 3 projects s30 to 60 minute flight from our home drome  my use was more to go check out potential loans and things i might want to buy.. with the airplane is was pretty easy I detailed my trips in my flight log book.. so my CPA just handed them my log book and he was out of the meeting in 30 minutes with no ding.  So I think if you just create your own log book and maybe back it up with a few time stamp photos of your rentals you should have no issues. 

    good luck with the car.. one thing about EV they dont break Other than my windshield getting broken by a falling limb during and ice storm its never been to the shop. there is no scheduled maintenance on Teslas . 10 year 100k for battery and drive is the same on Tesla although I always sell my cars at about year 3 or so since I always want the latest and greatest.. the only thing that cost more is I did need new tires at 30k miles I had not bought new tires in 30 years and they were 300.00 a peice.  With Tesla all the upgrades that are constantly happening and any bug fix's come to you over the air you dont need to take them in.. And if you do have a minor problem they send mobile service to your home.

    I was early on the cybertruck and the trick to getting one early run is to order the most expensive one.. they deliver those first then work down the list.  

    As for Biden have a bias against Tesla I think it because Tesla is not union also does not use the dealer model sells direct I mean in Texas were they are spending BILLIONS they are not even allowed to sell a car / truck in Texas now I have to think that will change with all the investments they have made there in Austin. 

    lastly I sure dont miss going to the gas station its not that its a huge expense between wife and I probably be 300 or so a month but the time it takes ..  in Portland its illegal to pump your own gas so you just have to sit there and wait for the attendant to do it for you..  The supercharger network is far superior to the others I will tell you that.. they are much more reliable and we get a full charge in 20 to 30 minutes max and there is always 6 to up to 12 to 40 of them at a supercharger station.  Where as with the other companies there might only be two of them one being used and its slow and the other broken.. as well as with Tesla supercharger everything is done on your app.. you just load your credit card and no need to do anything else just pull up plug in turn on a movie on your big screen and relax.. or go take a pee  LOL
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    JLH Capital Partners51 Review
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