John Bullis: Buy business vehicle and save taxes
December 11, 2018
IF you need a business SUV, van or crossover vehicle AND you need more tax deductions for 2018:
1. Buy and place in service by Dec. 31 a new (or used) business vehicle (OK to have mostly business use with some personal use) and
2. Do a draft 2018 return to see how much you want or need more business expenses.
Either you or your corporation can buy and place in service a new or used SUV the manufacturer classifies as a truck and has a gross vehicle weight rating of 6,001 pounds or more. Then you have some options about tax deductions.
You could claim 100 percent of the cost as Bonus Depreciation. Or you could claim Section 179 expense of up to $25,000 and regular five-year depreciation on the rest of the cost.
"Placed in service" is easy to prove if you drive the vehicle at least one business mile before the end of the year. Use you cell phone and make notes in your vehicle log of that business use.
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If you or your corporation buys a new or used pickup and places it in business service before the end of the year you have choices of what tax rules to use on your 2018 income tax return.
You could claim 100 percent of the business use portion of the cost as Bonus Depreciation. Or you could claim Section 179 expensing of 100 percent (if you don't purchase more than $1 million of business assets in 2018). Plus you can claim regular depreciation over five years for the balance of the business portion of the cost (in addition to Section 179 expensing). The pickup truck needs a gross vehicle weight of more than 6,000 pounds and a cargo area (bed) that's at least six feet in the interior length to do Section 179 expensing.
If you buy a new or used car for business use that weighs less than 6,000 pounds, the "luxury" passenger vehicle rules allow up to $8,000 in Bonus Depreciation and special regular depreciation expense for the rest of the business cost. The new 2018 luxury passenger vehicle depreciation allowances are $10,000 for the first year (in addition to the $8,000 of Bonus Depreciation); then $16,000 expense in the second year; $9,600 depreciation expense in the third year, and $5,760 depreciation expense in the following years. Be sure to document the business use cost. This is allowed for a car, pickup, SUV or van that weighs less than 6,000 pounds.
Doing a draft of your 2018 tax return is important to do good tax planning.
Did you hear "Every man is enthusiastic at times. One man has enthusiasm for 30 minutes, another man has it for 30 days, but it is the man who has it for 30 years who makes a success in life." Edward B. Butler
John Bullis is a certified public accountant, personal financial specialist and certified senior adviser who has served Carson City for 45 years. He is founder emeritus of Bullis and Company CPAs.