So per my previous post on this forum, I have a car (03 Honda Civic, 180K+ miles) which is nearing the end of its life. Due to recent repair expenses, I've been looking at getting a newer car soonish, ideally paying around 8K cash for a 2012 or newer car with around 100K or less miles. This seems to be a reasonable expectation, given current Craigslist listings. And thankfully, since my current car is still running, I can afford to take my time looking.
I also have a side hustle (sole proprietorship) that brings in a small amount of income each year, and after a bit of research, I realized I might be able to deduct all/some of the price of a new car from my taxes. My current idea is this:
1. Buy newer car for cash before the end of the year.
2. Keep old car and continue to use it for commuting. Only use newer car for business trips and the occasional weekend in-town jaunt.
3. Use Section 179 property depreciation deduction to deduct purchase price of the car from my 2019 taxes, up to the deduction limit or 90% of my net profits, whichever comes first.
4. Continue to use newer car primarily for business trips, deduct extra expenses (insurance, registration, etc) from taxes for my business, until old car goes to the great highway in the sky.
5. Transition newer car into primary/only vehicle, and only use standard mileage deductions henceforth.
For the more tax- and small business-savvy folks out there--does this sound like a reasonable plan? Are there any tax or other legal pitfalls that I might be missing? Or any other reason you can think of why I shouldn't do this (other than the added expense of insuring and maintaining two cars)?
Also, if I deduct the purchase cost of the new car off my 2019 profits, and also deduct the applicable mileage from my older car (that I've been using to drive to shows and whatnot all year) off my 2019 profits, is that still legit? Or is that double-dipping as far as the IRS is concerned? My business is pretty small potatoes, but I'd still really prefer not to get audited ...
