Rivians are all the fad in L.A. — and the inflow of the electrical vehicles and SUVs has put a highlight on an previous IRS provision as individuals casually brag over lunch about claiming them as farm automobiles for the tax advantages.
When it was enacted in 1958, Part 179 was aimed toward vehicles with a gross car weight ranking of over 6,000 kilos which can be used for enterprise — resembling industrial vans, work-
outfitted pickup vehicles and farm tools — however what the IRS didn’t see coming was the crop of outsized private automobiles that hit the highway within the early aughts and met the burden customary, like an opulent 2001 Vary Rover weighing in at 6,130 kilos.
Eager-eyed CPAs began classifying these luxurious SUVs as enterprise automobiles and taking deductions on the depreciation. In the event that they performed the tax filings accurately, there have been an entire slew of additional bonus depreciation deductions that have been as outsized as a Hummer EV.
Quick-forward to 2023, and a brand new crop of monumental electrical automobiles — together with the stylish Rivian R1T Pickup truck, which suggestions the size at 7,173 kilos — is beginning to see an analogous frenzy with hopeful Part 179 deductions.
Irvine-based Rivian has been ramping up manufacturing to satisfy the demand, delivering 15,564 R1T pickup vehicles (beginning at $73,000) and R1S SUVs ($78,000 and up) to prospects within the third quarter of this 12 months. So, no, your eyes should not deceiving you when you’re immediately seeing them in every single place in L.A.
As hip new EVs just like the Rivian got here to market, a melange of social media cash influencers began speaking a couple of sizzling tip they “lately found” — with a correct tax technique, these six-figure EVs change into magically free. Which, after all, is pure hyperbolic clickbait.
Due to the social stir, the precise professionals are having to carry their purchasers again to earth. Enterprise supervisor Jason Schneider solely half jokingly says, “TikTok ‘monetary specialists,’ please cease making an attempt to persuade my purchasers that luxurious SUVs are nice investments due to bonus depreciation guidelines!”
Whereas Part 179 is a really actual deduction when used as supposed, quite a few enterprise managers say off the file that they’d by no means take the deduction for his or her non-farming purchasers as a result of it’s a pink flag for an audit.
“I believe it’s bullshit.” says Matt Farah, host of the favored Smoking Tire podcast and founding father of Westside Collector Automotive Storage, who objects to the deduction on ethical grounds due to the local weather disaster. “It’s ridiculous that persons are perverting the regulation and the deduction,” he says, including that incentivizing “big electrical SUVs and luxurious vehicles not getting used for work of any form” is environmentally and ethically doubtful. He provides, “Additionally, it’s completely shady, and, if you’re audited, you’re screwed.”
This story first appeared within the Oct. 25 difficulty of The Hollywood Reporter journal. Click on right here to subscribe.