Tax Guru – Ker$tetter Letter

Q:

Kerry,

I currently have a day job where my gross pay will be around $110,000 for 2007.  I also own a 60% stake in an LLC, seperate from my $110,000 job.  I need to buy an SUV for my LLC for about 80% business and my use only. In respect to Tax Code Section 179, what is my best strategy for buying a $30,000 SUV that is section 179-eligible? Can I personally take the Section 179 tax break? Or do I get only 60% of the section 179 deduction? Can I take the section 179 deduction on my own or does it have to be through the business?  Your help is greatly appreciated.

A:

This is the kind of thing you should really be discussing with your own personal professional tax advisor because there are a lot of factors to take into consideration.

Tax-wise, you could achieve pretty much the same benefits either way; buying it personally or through the LLC.

From a more practical sense, what would concern me more is how you and your partner in the LLC can ensure that you are each getting your fair share of the deal.  It’s an easy enough task to specially allocate the Section 179 for the purchase to your K-1.  What gets messier is how to allocate the operating expenses.  Are you going to pay them personally or is the LLC?  The person who is handling the tax and accounting work for the LLC should also be part of this decision process to see if it would just be cleaner to have each of you take care of your vehicles on your own, which is what I frequently see with situations similar to yours.

There are obviously other factors to consider when working with a multi-owner business that wouldn’t be a concern for a company owned by a single person or a married couple. 

Good luck.  I hope this helps you and your personal professional tax advisor work out the best game plan for your unique circumstances.

Kerry Kerstetter

Follow-Up:

thanks for the response Kerry!