All sorts of businesses rely on four wheels to run their operations. If you need to buy a new pickup truck, SUV, van, or car, you could save on your taxes! It’s all thanks to the Tax Cuts and Jobs Act (TCJA). However, you’ll need to make the purchase before the end of the year to maximize your savings. You will also need to put the new vehicle into service (drive it at least one business mile) on or before December 31, 2019, so there’s no time to lose! Here’s a look at what you should know, depending on the type of vehicle your company needs.
Buying a New or Used Crossover, SUV, or Van
This category applies to any vehicle, including SUVs and crossovers, which the manufacturer has classified as a truck. It must have a gross vehicle weight rating (GVWR) above 6,000 pounds. If you purchase this type of vehicle and put it into service before the end of the year, you can get bonus depreciation, regardless of whether it’s a new or used vehicle. You’ll get the following:
- Elimination of luxury limits on vehicle depreciation deductions
- MACRS depreciation (five-year table)
- Expense up to $25,000 with Section 179
- 100% bonus depreciation
Buying a New or Used Pickup
Your business can also save on taxes if you purchase and place into service a qualifying new or used pickup by the end of the year. You’ll get the following:
- Elimination of luxury limits on vehicle depreciation deductions
- MACRS depreciation (five-year table)
- Expense up to $1,020,000 with Section 179
- Up to 100% bonus depreciation
Note that in order to qualify for the expensing under Section 179, the pickup must weigh more than 6,000 pounds. It must also have a bed or cargo area at least six feet long that cannot be easily accessed from the passenger area. In other words, it must be a pickup truck, and not one with a short bed. If yours has a short bed, you can still follow the SUV rules to get the tax benefits.
Buying a Cargo or Passenger Van
A new or used qualifying cargo or passenger van is eligible for the same tax benefits as outlined in the section for new and used pickup trucks, including up to $1,020,000 with Section 179. However, in order to qualify as a cargo van for Section 179 or the bonus depreciation, it must weigh more than 6,000 pounds, not feature seating behind the driver’s seat, fully enclose the driver’s compartment and load-carrying area, and not have any body section that protrudes more than 30 inches past the windshield. To qualify as a passenger van, the vehicle must weigh more than 6,000 pounds and seat at least nine people behind the driver’s seat.
Buying a Depreciation-Limited New or Used Car
A new or used car, or another vehicle with a GVWR that is not above 6,000 pounds, may be eligible for up to $8,000 in bonus depreciation. Through 2019, the adjusted limits are:
- First taxable year – $10,100
- Second taxable year – $16,100
- Third taxable year – $9,700
- Each succeeding year in the recovery period – $5,760
Every business, no matter how small or large, can benefit from the professional guidance of a certified public accountant (CPA). Call The Royce CPA Firm in Tucson at (520) 321-4626 for the help you need. You can pick and choose which financial services you need or select our Full Service Plan, which includes bookkeeping, tax preparation, and specific planning services.