Lethal Combination-Heavy Vehicle & Home Office

October 5th, 2019 at 4:57 PM

You can reap major tax savings with the heavy vehicle and home-office combo. 

The heavy vehicle produces quick deductions. The home office that qualifies as a principal office eliminates commuting miles, and such an elimination can dramatically increase your business-use percentage of vehicles. 

For example, say you bought a $50,000 vehicle that you use 60 percent for business. Your depreciation and expensing elections apply to $30,000. But if you can increase your business percentage to 90 percent with a tax code–defined principal office in your home, your base for tax deductions increases to $45,000—that’s a $15,000 increase, and you did not spend a penny or drive a mile farther to capture it. 

The heavy vehicle strategy requires a gross vehicle weight rating (GVWR) of more than 6,000 pounds. If tax law classifies the heavy vehicle as an SUV, your Section 179 expense deduction is limited to $25,000; otherwise, your limit is subject only to the $510,000 ceiling. 

On a heavy SUV, the $25,000 ceiling produces benefits on both new and used vehicles. 

If the SUV is new (not used), you qualify for the generous 50 percent bonus depreciation. This can add up quickly. For example, on a new SUV with a GVWR greater than 6,000 pounds for which you have a business cost (based on your business percentage) of $50,000, you can qualify for a first-year write-off of up to $40,000 for the cost of the vehicle alone. 

The combination strategy of a heavy vehicle and a qualifying home office applies to your business regardless of business form. 

Mark S. Fineberg, CPA