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Now may be a good time to buy a heavy SUV if you're a small business owner. That's because Congress recently sweetened an already hefty first-year tax break for folks who buy these vehicles and use them for business. That new sweetener is "bonus" depreciation, which lets businesses write off 50% of the cost of an asset placed in service this year, on top of the $25,000 maximum on first-year write-offs.
The tax savings really pile up when you put bonus depreciation together with the existing SUV break. Here's how it works: You purchase a heavy SUV costing, say, $50,000 during 2008, to be used exclusively for business and start using it right away. You'll first write off $25,000, which is the limit for first-year expensing of these vehicles. Next, you apply 50% bonus depreciation to the remaining $25,000 of cost, which allows you to write off another $12,500. Finally, you deduct 20% of the $12,500 balance as regular depreciation. Your total tax savings: A whopping 80% of the purchase price -- or $40,000.
There are, however, a few caveats to keep in mind: First, you need to make sure that you buy an SUV that qualifies as "heavy." It has to be a passenger vehicle with an enclosed body, and the manufacturer's loaded gross vehicle weight rating for the SUV must be between 6,000 and 14,000 pounds. Examples of heavy SUVs include the Chevy Suburban, Dodge Durango, Ford Expedition, GMC Yukon, Cadillac Escalade and Lincoln Navigator. Also, you must purchase the vehicle new -- used SUVs won't qualify for the 50% bonus. Finally, don't delay in the hopes that bonus depreciation will still be around next year: Congress only OK'd the extra write-off for 2008 and isn't likely to extend the largesse.
If a heavy pickup truck is really what your business needs, you'll save even more tax-wise because pickups are exempt from the $25,000 write-off ceiling that applies to SUVs. The first-year expensing limit on heavy pickups is $250,000 for 2008, so you'll generally be able to write off the entire cost. To be eligible, the pickup you purchase must have a loaded gross vehicle weight rating over 6,000 pounds and a separate cargo area at least six feet in length that is not directly accessible from the passenger area. The cargo hold can be capped.
If you buy an SUV or pickup weighing below 6,000 pounds, the first year write-off is capped at $10,960. For used vehicles, the maximum is $2,960.
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POSTED BY: James Paul Beachboar (May 16, 2008 11:33 AM)
Insanity
POSTED BY: Rich Mann (June 22, 2008 11:47 AM)
Janes - Waaaaaa! I suppose that means you won't be qualifying for the deduction.
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