Okay, as detailed in my roadtrip of doom thread, I bought an old car in Denver that I plan on restoring/customizing. Now since I’m a machinist, I’m going to be doing a lot of the work myself, and I want to use the car as a showcase of my talents in hopes of landing a better paying job and/or sidework, so it seems to me that I ought to be able to deduct the thing and the trip to get it as a business expense. Now, I don’t have time to go into all of the things that I’m planning on doing to the car, suffice it to say that they’ll be expensive, and for reasons that are too complicated to explain, it does need to be the vehicle I bought, or one similarly equipped for me to do all the things that I’m planning to do to it. I couldn’t have used one of the vehicles that I currently own to do these things. So am I wrong in this? And what do I need to have documented so that I can take it off on my taxes (besides the reciepts of my expenses)?
(Note, that until the car’s up and running the way I want it, it will not be a daily driver.)
IANACPA, but just based on a quick perusal of IRS Pub 535, it seems to be that you’ve got a threshold problem, and that is that you don’t actually have a business, yet. You’re not incorporated, you’re not a partnership, you’re not filing taxes as a sole proprietorship, etc.
You do have a job, but there’s nothing about that job that requires you to purchase a car and have a glamorous ( ) road trip to go pick it up. So, there’s absolutely no way it’s deductible as a business expense on your Schedule A.
So what is it? Well, it sounds like you’ve invested in this car in the hopes that it will lead to some sort of business activity. As such, it’s a capital asset. So, let’s say you paid $1000 for the car, and spent $300 going to get the sucker (just making up numbers, here, of course). Your capital basis is $1300.
Let’s say that this investment doesn’t actually lead to you starting up a business. Then, when you sell that car, you’ll either have a capital gain or a capital loss. So if you sold it tomorrow for $1200, you’d have a $100 capital loss, which you’d report on Schedule D.
If you actually do end up going into business, you can depreciate the car over a certain period, and use that depreciation to offset business income. But that’s a whole 'nother kettle of fish.
I hope a real CPA will wander into this thread and give you the real skinny, even if it means telling me that I’m blowing smoke again.
IANACPA either, but my brother is a tax expert, and he says that you’re close. IF & When our OP gets a real schd C business doing custom cars or something, then he could depreciate it or amortize it as Business Start up costs. But as for now, he has no Income to write the income off against.
) road trip to go pick it up. So, there’s absolutely no way it’s deductible as a business expense on your Schedule A.