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If you are considering buying or leasing a vehicle for your business, you may be in for an unexpectedly large tax benefit. As you may be aware, the depreciation deduction for passenger vehicles is rather skimpy, roughly $3,000 during the first year. The key here is "passenger vehicle" and what the IRS does not consider to be a passenger vehicle.
Any automobile with a gross vehicle weight rating (GVWR) above 6,000 pounds that (1) is on a truck chassis or (2) is classified as an SUV or minivan can potentially qualify and is eligible to be depreciated much more quickly than a regular passenger vehicle. In your business, this may be most of the vehicles you are already using.
Let's say you buy a Chevy Tahoe SUV for $35,000 that you use 100% in your business. (All vehicles we use are 100% business use aren't they?) Because of the rather generous depreciation rules and this often overlooked loophole, generally your first year tax write-off would be approximately $23,000. Depending on your tax bracket, the Federal and State tax savings on this deduction alone could be well over $7,000. Also, be sure that the dealer does not charge the federal luxury auto tax on the sale. This does not apply to vehicles with GVWR above 6,000 pounds.
The list of vehicles heavy enough to qualify for this is surprisingly long and is regularly changing with new and retooled models. In making your decision, always verify the GVWR yourself; the label is usually found attached on the inside of the driver's side door.