Section 179 Vehicle Purchase with 2 Rental Properties + Multi-family PR

[Jasdeep Singh]

Hi,

I am a NY resident and own:

-Owner occupied multi-family property in NY (Where I live)

-2 Rental properties in the DC/Baltimore area

I commute to these properties every other month or so for maintenance, checking in new tenants, fixing and updating things around the house. Would I be able to purchase a vehicle (say over 6000+lbs), and write off 50% of the 2022+ max allowable deduction if I use my vehicle: a)Some personal amount b)Travelling to DC/MD for rental property maintenance c)Run a 'rental advertisement' on my vehicle d)Upgrade and maintain the multi-family property I live in (does this count as an additional rental since its multifamily)?

I currently generate a net profit from my rental properties, and wanted to know if leveraging Section 179 even partially would allow me to both essentially purchase the vehicle at discount (and spread cost over multiple years), plus write down my rental NI to 0 via the deduction?

Interested to learn more about the application of Section 179 for my type of use cases. Thanks everyone.

[Michael Plaks]

@Jasdeep Singh

Let's not focus on Section 179 before understanding the big picture.

You have a net profit from your rentals and are looking for ways to minimize your tax exposure. Here're the questions to review first, and you won't be able to accomplish it in on online forum.

- How did you calculate your net profit? Is it really your taxable income?

- Are you optimizing your depreciation? Is there room for improvement?

- Are there some other available deductions that you're currently overlooking?

Only after that we should be talking about a vehicle. Generally, you never buy anything for tax reasons. You buy it when you need it, for personal or for business reasons. 

To reframe your question: if you buy a new vehicle and use it partially for your rental business, what can you deduct? It's actually a complicated question. You either deduct mileage allowance at 65.5 cents per business-related mile or you deduct actual expenses, including depreciation. Section 179 is a method of enhancing depreciation.

The actual expenses method is based on your business use percentage. Traveling for maintaining your out-of-town properties is business use. Rental advertising on your vehicle is NOT business use. Buying supplies for your MF property is business use. And so on. 

Your driving can be structured in a way that maximizes business use. It's an art, not science. If your business use is high enough (over 50%), you may be able to use Section 179 to some degree. Or you may be able to use other methods. It's case by case.