Quote:
Originally Posted by fuddman
At some point down the line, after all the fun, your CPA will break the bad news to you. It goes something like this: "Remember the taxes I saved for you with depreciation on the car? Well now the IRS wants it all back."
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Excellent point, very real and something to be aware of it. I've experienced this a few times and had to "give" more than a small portion back, as my cars are typically low mileage, in excellent condition and have held their value well. It largely depends on how high your business % usage is, what kind of miles you expect to put on the car before you sell it, and of course the unpredictable market.
Quote:
Originally Posted by Aloha Joe
You're correct to a certain extent. "Depreciation Recapture" only occurs on the amount of the asset that you sell above adjusted cost basis. As we all know, cars really do depreciate in value. So the recapture amount, if any ever occurs, will be small.
Example, you purchase a $40,000 car, take 70% (business mile usage) of the maximum automobile depreciation for 3 years, which comes out to $7,917. At this point, you decide to sell the car, for "Depreciation Recapture" to occur, you need to find a very generous buyer to pay you above $32,083 for the car.
And if you're lucky enough to find that rare buyer, recapture only occurs on the amount of the car that sold for above $32,083. So, for the IRS to take it all back? You need to sell that 3 year old car for the original $40,000!
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Hmm, sell at the original MSRP three years later and give it all back?! Oh, like a 1M.
It remains to be seen until we know production levels, but the M2 might also have a recapture "problem" at some level - a problem everyone would be happy to have.