If you own a business, you should understand the tax rules for buying an SUV or truck. If you use the vehicle for your business, you can and should deduct the operating expenses of the vehicle. But you can also deduct the cost of an SUV or truck. As an SUV owner and small business owner, this article will focus on the latest auto tax cut rules for 2022 and beyond. With the passage of the tax reform bill at the end of 2017, buying a truck or SUV over £6,000 became even more favorable for 2018 and beyond. Below are the tax deduction rules for SUVs and trucks.
SUV and Truck Tax Deduction Rules for Businesses
Let me start by stating that I am not an accountant, but I do have one. I’m also a tax law enthusiast and have been trying to reduce my tax liability since I started in 1999. I have paid more than $2 million in federal income tax over the past 22 years. To understand the process of writing off a vehicle as a business expense, of course the first thing I did was go to a Land Rover dealer! Check out the SUV/truck car tax deduction rules that apply to your business.
Car tax cut rules
You can only write off 100% if the vehicle is 100% commercial and you buy a brand new Vehicle over 6000 Pounds (not a private used car) from a dealer. It has to be brand new and number of all-new SUVs weighing over 6,000 pounds in the example.
Start a business; take advantage of the auto tax cut rules
So you have it man. The reason Land Rover has a large number of “off the shelf” tax depreciation booklets is because many businesses purchase 6,000-pound vehicles under their business entities and write off expenses over time as tax laws allow. It’s important to note that the IRS screens small businesses based on audit fees and tax rates. If your business only brings in $30,000 in gross revenue per year, then four-year amortization on the purchase of a $75,000 SUV could raise red flags. However, if your business grosses $500,000 a year, writing off $10,000 to $45,000 a year in fees may not seem overwhelming. The IRS is looking for small businesses that were created simply to move living expenses into entities to reduce income tax.
As always, speak with your accountant before making any tax changes. Given that I prefer SUVs to cars, especially considering that I have young kids to protect, if a new car is needed, it’s absolutely necessary for me to buy a brand new car under my business. After accounting for tax deductions, I would get about 30% off the purchase price.
Tips for Avoiding Depreciation Recycling
I would like to highlight a great comment from a reader in the commercial equipment leasing/financing industry. He offers a reason to lease rather than buy. If you want to avoid “depreciation recovery” and don’t want to crash your vehicle into the ground, you can rent a vehicle. You can still pay rent based on your business, and at the end of the lease, you just have to give it back. This way you:
- Did not spend $50,000 up front to buy it (capital protection)
- 100% of the rent has been written off (maximum write-off tax)
- Do not suffer losses when selling vehicles (prevent losses when selling depreciable assets)
- Not get trapped by obsolete vehicles (curb obsolete)
In conclusion – Sector 179 Deduction Vehicle List:
- 100% commercial use, if not, the commercial use rate is deductible, egg 65% commercial use, 65% depreciation/deduction schedule. Keep a mileage record! 100% business usage is usually not possible, so the more conservative 95% depreciation is used in the example above.
- The IRS allows up to $25,000 in upfront depreciation (100%) for SUVs over 6,000 pounds plus an additional 50% depreciation for new cars approaching that figure. For commercial purposes, the vehicle must be driven more than 50% of the mileage. Additionally, you must reduce your personal use percentage by $25,000.
- Good! If you’re looking to buy a new SUV, we’ve got a winner here. The IRS allows employees and the self-employed to use standard mileage rates for vehicles under the 6,000-pound limit, with business driving at 56 cents per mile in 2021.
- If you can’t or don’t want to deduct based on mileage, you can deduct based on vehicle operating costs. Costs include tires, maintenance, gasoline, etc. It’s one or the other.