If you’re looking to boost your deductions — and reduce your
2016 tax bill — you may want to consider purchasing a business vehicle before
year end. Business-related purchases of new or used vehicles may be eligible
for Section 179 expensing, which allows you to immediately deduct, rather than
depreciate over a period of years, some or all of the vehicle’s cost. But the
size of your deduction will depend in part on the gross vehicle weight rating.
The limits
The normal Sec. 179 expensing limit generally applies to
vehicles with a gross vehicle weight rating of more than 14,000 pounds. The
limit for 2016 is $500,000, and the break begins to phase out dollar-for-dollar
when total asset acquisitions for the tax year exceed $2.01 million.
But a $25,000 limit applies to SUVs rated at more than 6,000
pounds but no more than 14,000 pounds. Vehicles rated at 6,000 pounds or less
are subject to the passenger automobile limits. For 2016 the depreciation limit
is $3,160. The amount that may be deducted under the combination of Modified
Accelerated Cost Recovery System (MACRS) depreciation and Sec. 179 for the
first year is limited under the luxury auto rules to $11,160.
In addition, if a vehicle is used for business and personal
purposes, the associated expenses, including depreciation, must be allocated
between deductible business use and nondeductible personal use. The
depreciation limit is reduced if the business use is less than 100%. If the
business use is 50% or less, you can’t use Sec. 179 expensing or the
accelerated regular MACRS; you must use the straight-line method.
Maximize your tax benefits
Many additional rules and limits apply to these breaks. So if
you’re considering a business vehicle purchase, contact us to learn what tax
benefits you might enjoy if you make the purchase by December 31.
© 2016
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