Model X May Qualify For Preferential Tax Treatment


The Tesla Model X may qualify for a one time deduction of $25,000 under Section 179 of the IRS Code in addition to the federal tax credit of $7,500.

Under Section Section 179 of the Internal Revenue Code, business owners who purchase a Tesla Model X for use in their trade or business may by able to deduct up to $25,000 from their taxable income in the year they buy the vehicle, rather than depreciating it over several years.

Often called “the Hummer loophole”, it is “generally limited to tangible, depreciable, personal property which is acquired by purchase for use in the active conduct of a trade or business”, according to Wikipedia.

Section 179 applies to motor vehicles with a gross vehicle weight rating (GVWR) of between 6,000 and 14,000 pounds. The gross vehicle weight rating is the curb weight of the vehicle plus the weight of the driver, passengers and cargo capacity but excluding the weight of any trailer and towing capacity.

The Model S has a 5,710 lbs GVWR with a curb weight of 4,608 lbs. Elon has said the Model X should be 10% heavier than the Model S making the X well within the minimum needed to qualify for Section 179 treatment. The Model X would be the first electric passenger vehicle to so qualify.

The 179 election is optional and only applies for the year the equipment is placed in service. The election is waived if not taken for that year. Once made, it is irrevocable unless special permission is given.

Keep in mind that the federal tax credit of $7,500 for electric vehicles also applies, so a person who purchases a Model X for use in trade or business could potentially deduct $25,000 of the purchase price in the first year under the provisions of Section 179 and get a $7,500 tax credit as well.

That possibility might make it worthwhile for you to take your accountant or tax attorney out for a (tax deductible) luncheon soon. Once you have all the necessary information,  you might decide it makes sense to call Tesla Motors  and place an order for new Model X of your own.

Disclaimer: I am not an accountant or tax attorney, nor have I ever played one on TV. If anything in this article piques your interest, you should discuss your options with a qualified professional.

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