Is Your SUV Available for Maximum Tax Deduction?

June 2nd, 2021 at 3:27 PM

Here’s a vehicle story that you will find of interest.

Taxpayer DJ is in an IRS audit of his 2018 tax return. It is now at the IRS appeals level.

The vehicle in question is an SUV with a curb weight of 5,700 pounds and a gross vehicle weight of 6,100 pounds.

• If the tax code makes the SUV a passenger vehicle, the curb weight of 5,700 pounds limits DJ’s tax deduction to $18,000.
• If the tax code makes the SUV a truck using the gross weight of 6,100 pounds, DJ’s deduction is $55,000.

The IRS lawyer who is handling the appeal tells DJ that he has to use curb weight because his SUV is built on a car chassis.

Wrong. DJ wins his $55,000 deduction. Here’s why.

To qualify for bonus depreciation (or Section 179 expensing), the SUV must escape the luxury vehicle depreciation limits on deductions.

The escape works like this:

1. The SUV must have a gross vehicle weight rating (GVWR) of 6,001 pounds or more.
2. Also, the SUV must be a truck under the Department of Transportation (DOT) regulations. (Using guidelines set out in DOT regulations, manufacturers label SUVs as “trucks” or “cars.”)

Under the DOT rules, an SUV can qualify as a truck regardless of chassis.

Mark S. Fineberg, CPA