Tax tip: Practice owners may be able to expense cars

In our story in the March 13 issue of Part B News on tax breaks that physicians should consider, we mentioned the possibility of expensing the use of a car.

 

One of our sources, Tom Wheelwright, CPA, CEO of the Tempe, Ariz., tax consultancy WealthAbility and author of The Win-Win Wealth Strategy, explains: “If the doctor has their own practice (not a W-2 job), then they can deduct business automobile expenses just like any other business owner.”

 

But deductions of luxury autos – which the IRS, oddly, defines as four-wheel vehicles that weigh 6,000 lbs. or less – normally are “severely limited,” Wheelwright says. (Note that SUVs over 6,000 lbs. are treated as trucks for IRS purposes.)  But if you lease rather than buy your car – as many M.D. owners do – those expenses are “generally unlimited except for a small add-back for luxury autos.”

 

“Now, if there’s a bargain purchase option at the end of the lease – let's say five years and at the end you pay a dollar for the equipment – that's no longer a lease, that's a purchase,” Wheelwright says. “That can actually be good for [the physician], because then they'll be able to treat it as a purchase and take 100% through a Section 179 deduction, even though they're leasing."

 

See more at the story.