It’s year end, your business prospered during the year, and you’re looking for tax write-offs to help reduce Uncle Sam’s tax bite on your income tax return. Your accountant suggests you buy a new business vehicle. (Your car dealer agrees!)
But which vehicle or truck should you buy to get the fastest write-off? Here are some tax planning tips and traps you should know about when it comes to buying a new auto or truck for your business.
Did you know that the IRS has placed limits on on certain vehicles as to the amount you can write-off in the year of purchase? It’s $3,160 for autos, and $3,460 for light trucks and vans under 6,000 pounds. But there are other ‘heavy metal’ vehicles and trucks that get you faster write-offs.
Specifically, if a vehicle is a truck or a van, or has a truck base (as most SUV’s do), and has a manufacturer’s suggested carrying weight over 6,000 pounds, the yearly limits on depreciation mentioned above do not apply.
In 2015, businesses can elect to write off up to $25,000 worth of equipment (including vehicles) as long as the total expenditures on equipment is less than $200,000.
Note: In prior years qualifying vehicles could be 100% written off in the first year—that’s changed in 2015.
Here’s an example: You buy a Cadillac Escalade for $60,000, and use it 90 percent for business. You can elect on your tax return to deduct $25,000 this year. In addition, you can deduct the remaining $29,000 of business use ($60,000 x 90% business use, less $25,000 = $29,000) over six years, with 2015 being one of the six years.
ANCHOR ON THIS: Some vehicles allow you a bigger tax write off than others in the first year you purchase them. If you buy a new or used SUV that has a gross vehicle weight over 6,000 pounds and carries passengers and has a truck chassis, you can write off over $25,000 in the first year.