SUV Tax Law for Self employed?

Question

Hi All,

I am self employed and was planning to buy an SUV for use for my business purposes and just heard about this law that any vehicle that weighs over 6000 pounds as To qualify for the deduction (Section 179 of the tax code), an SUV or light truck must have a gross weight of at least 6,000 pounds. This is the vehicle weight plus maximum payload and also is referred to as gross vehicle weight rating or GVWR. Does anybody have any insight into it. I am planning to buy BMW X5

Answer 1

There is a section of the code, Section 179, that provides an immediate deduction for vehicles that would otherwise be depreciated over a longer term; say 5 years.

The law changed recently relating to SUVs that weigh over 6,000lb. The IRS quickly realized that when they placed a 6,000 lb threshold on vehicles that many luxury SUVs would meet that guideline. To close the loophole, the IRS then stated that a $25,000 limit is imposed on the cost of sport utility vehicles that may be taken when utilizing the capital asset expensing election provided in IRC Section 179.

This means that any SUV with a cargo area of less than 6 feet long, that is not readily accessible from the passenger compartment, also falls under this restriction. This limits the deduction to $25,000 for these trucks over 6,000 lbs and a cargo bed of less than 6 feet.

If you're going to buy an SUV, be aware of this new restriction. Also, it may be a good idea to determine the business use of the vehicle. If it is used for less than 50% for business, you cannot use the section 179 deduction for the vehicle.

Hope that helps. Below is a great link that describes everything.

Answer 2

The BMW X5 isn't going to qualify as a SUV which weighs over 6,000 pounds. The GVWR to which you refer does NOT include any payload whatsoever. The vehicle itself must weigh over 6,000 pounds, empty. That limits you to things the size of a Ford Excursion or similar.

Answer 3

I agree with the other posters, but there's something I'd like to add: if you're going to buy a massive SUV like an Escalade or something like that, you had better make sure that it's placed into business use before 12/31/07. Translated: don't buy it on December 30, use it personally for the weekend, and then start driving it for work on January 2, 2008. That would disqualify the asset as being placed into service during 2007.