Your Vehicle Tax Benefits-Bonus Depreciation & Section 179

August 8th, 2015 at 11:28 AM

If you buy a large SUV or truck for your business, you can write off the entire business cost in a relatively short time regardless of what lawmakers do with the extenders package in 2015. For the past 10 years Congress has added 50 percent bonus depreciation and bigger Section 179 expensing deductions to certain vehicles. Presently, there is no increase in 2015 Section 179 expensing of $25K, and no bonus depreciation available. However, the following overview will illustrate that it may not much if Congress decides.

Overview

Bonus Depreciation: Allows taxpayer to deduct 50% of the business cost of a new asset in the year its placed in service. Example–You purchase a qualifying asset for $100K. You expense $50K immediately as bonus depreciation, reducing the tax basis to $50K subject to the regular depreciation schedule tables.

Section 179 expense deduction: Taxpayers can expense qualifying Section 179 deductions on both new and used assets in the year placed in service; last year the limit was set at $500K; if Congress does not extend $500K limitation for 2015, the limit will be reduced to $25K.

Special Rule for SUVs: A qualifying SUV has a manufacturer’s gross vehicle weight rating (GVWR) of 6,001 pounds or more. Lawmakers have a special $25K limit on Section 179 expensing for a new or used qualifying SUV. Ignoring the Section 179 deductions you must depreciate the vehicle over 6 years.

A review of the various depreciation tax tables will reveal to clients how to proceed to maximize their deductions for their vehicles.