Deductions for Heavy SUVs and Trucks

Nov 19, 2011

As you probably know, the 2010 Tax Relief Act provided bigger depreciation deductions for business assets. In fact, under Section 179, businesses can expense up to $500,000 of depreciable business assets acquired during 2011, with any remaining basis fully deducted using the 100% bonus depreciation. Unfortunately, unfavorable depreciation rules apply to most passenger autos and light trucks used in business. For a vehicle acquired in 2011, depreciation deductions are generally limited to the following amounts:

New Cars
(With Bonus Depreciation)

Used Cars
(No Bonus Depreciation)

New Light Trucks and Vans
(With Bonus Depreciation)

Used Light trucks and Vans
(No Bonus Depreciation)

Year 1

$ 11,060

$ 3,060

$ 11,260

$ 3,260

Year 2

4,900

4,900

5,200

5,200

Year 3

2,950

2,950

3,150

3,150

Year 4 and thereafter

1,775

1,775

1,875

1,875









Of course, when a vehicle is used less than 100% for business, these figures are cut back even further. In fact, the average client may not live long enough to fully depreciate a really expensive car.

Exception for Heavy Trucks, Vans, and Sport Utility Vehicles (SUVs). These vehicles are not subject to the above limits. A truck, van, or SUV is "heavy" if it has a Gross Vehicle Weight Rating (GVWR) (the manufacturer's maximum weight rating when loaded) above 6,000 pounds. Below, we've listed many of the 2012 vehicle models that qualify for these special tax benefits based on their GVWRs at the time we checked them. As you can see, it's a surprisingly long list. In addition, there may be some we have missed (new and retooled models are coming out all the time). Thus, always verify the GVWR for yourself before making a buying decision. The GVWR can normally be found on a label attached to the inside edge of the driver's side door.

If you buy such a vehicle in 2011 and use it more than 50% for business, you may be able to deduct the entire business portion of the vehicle's cost this year. For example, if before the end of the year you buy a new $65,000 heavy SUV that has a gross vehicle weight above 6,000 pounds and is used 100% for business, you may be able to deduct the entire $65,000 this year.

To claim these deductions, you must establish through contemporaneous records (such as, a mileage log) that you use the vehicle over 50% of the time for business. If your business usage later falls below 51%, a portion of the deductions previously claimed will need to be recaptured and reported as ordinary income in that year. Also, deductions allowable for used vehicles may be limited as such vehicles do not qualify for 100% bonus depreciation. Finally, this strategy works best if you are self-employed-claiming a Section 179 and bonus depreciation deductions for a heavy corporate-owned vehicle is much more difficult. Nevertheless, the heavy vehicle deductions can generate major tax savings given the right circumstances.

If you would like more details, please do not hesitate to call a Swindoll, Janzen, Hawk & Loyd, LLC specialist at (620) 241-1826. Learn more about our services at http://www.sjhl.com/OurServices.

Vehicles with GVWRs above 6,000 Pounds[1]

 

Audi

Infinity

Audi Q7

QX56

BMW

Jeep

X5 M

Grand Cherokee

X6 M

Land Rover

Buick

LR42

Enclave

Range Rover

Cadillac

Lexus

Escalade

GX460

LX5702

Chevrolet

Avalanche

Lincoln

Express van

Navigator

Silverado

Suburban

Mercedes

Tahoe

G Class

Traverse

GL Class

M Class

Dodge

R Class

Dakota2

Durango2

Nissan

Ram

Armada

NV

Ford

Pathfinder

Expedition

Titan

Explorer

F150

Porsche

F250

Cayenne

F350

F450

Toyota

4Runner2

GMC

Land Cruiser2

Acadia

Sequoia

Savana

Tundra2

Sierra

Yukon

Volkswagon

Touareg

Honda

Pilot

Volvo

Ridgeline2

XC90

 

Source:www.autosite.com