Tax deductions if you have a fleet of commercial vehiclesĪre you a small or large business owner, or fleet manager? Are you just getting your business started, or a seasoned business owner looking to grow your business? Calculating your fleet spend at tax time, including mileage and leasing, can make a huge difference in your overall expenses. In this article we talk you through how to save money using bonus depreciation for vehicles you purchased in 2023 for your small or large business fleet. So to fully cash in on the aforementioned depreciation breaks, you must be committed to using the vehicle mainly for business for at least six years.As we head toward the end of the year, you are likely thinking about ways to save on your tax returns. Otherwise, you run afoul of “recapture” rules that will force you to add back some of your previous depreciation write-offs into your taxable income. In the five tax years following the year that you put your heavy vehicle into service, the business-use percentage must continue to exceed 50%. So consult your tax adviser about how to take full advantage of the depreciation breaks for heavy business vehicles in your situation. If you operate as a partnership, multi-member LLC, or corporation, special rules apply. These loopholes reduce the odds that you’ll be hurt by the net business income limitation. If you are married and file jointly, you can also count your spouse’s earnings from employment as well as any self-employment income that he or she may earn. ![]() However, if you operate as a sole proprietorship, or as a single-member LLC treated as a sole proprietorship for tax purposes, you can count any wages that you earn as an employee as additional business income. Source: IRS Chief Counsel Advice (CCA) 201138048.įirst, your Section 179 deduction cannot exceed your aggregate net business taxable income (calculated before the Section 179 write-off). So heavy crossovers qualify if they are used over 50% for business. More good news: The IRS has confirmed that heavy SUVs qualify for the aforementioned depreciation tax breaks whether they are built on a truck chassis or an auto chassis. You can usually find the GVWR on a label on the inside edge of the driver’s side door. Examples include the Audi A7, BMW X5 and X6, Buick Enclave, Cadillac Scalade, Chevy Tahoe, Dodge Durango, Jeep Grand Cherokee, Nissan Titan, Toyota Tundra, Ram pickups, and most other full-size pickups. ![]() It’s easy to find attractive vehicles with GVWRs above the magic 6,000 pound threshold. The Section 179 deduction and bonus deprecation deals are only available for an SUV, pickup, or van with a manufacturer’s gross vehicle weight rating (GVWR) above 6,000 pounds that is purchased (not leased). For a new $45,000 light truck or light van, your first-year write-off would be only $11,560. In contrast, if you buy a new $45,000 sedan and use it 100% for business, your first-year depreciation write-off will be only $11,160. You may get a healthy state income tax deduction too, although some states have refused to go along with the super-generous depreciation rules enacted by the federal government. The $37,000 in write-offs will reduce your federal income tax bill and your self-employment tax bill too. Your first-year depreciation deduction is $37,000: $25,000 Section 179 deduction + $10,000 first-year bonus depreciation deduction + $2,000 “regular” depreciation deduction. Next comes the allowable first-year bonus depreciation deduction, but this break is only available for new vehicles.įinally, the business portion of the remaining cost (if any) is depreciated under the “regular” depreciation rules, usually at a 20% rate in Year One.īefore the end of the year, you buy a new $45,000 heavy SUV and use it 100% in your sole proprietorship business. Importantly, pickups with cargo beds that are at least six feet in interior length are not classified as SUVs (pickups with shorter beds are treated as SUVs). Other heavy vehicles, such as long-bed pickups and vans, are unaffected by the $25,000 limit. For heavy vehicles that are classified as SUVs under the tax rules, the Section 179 deduction is limited to $25,000. ![]() The business-portion of the cost of a vehicle is first reduced by the allowable Section 179 deduction. The super-generous first-year depreciation deduction rules I’m about to explain only apply to vehicles used over 50% for business.
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