We received a question regarding how to write off a truck purchase in 2013. This gave me a great excuse to talk about all the different ways you can write off your car. First, here’s the question:
“Hello Diane I have a small business and I need to buy a truck 80% will be business use and very little personal. Section 179 deductions… How does it work, does it all get deducted at tax time or would I file with the IRS straight away of my intentions with regards to having the truck?”
There are three different rules and a dozen possible scenarios for writing off your vehicle in 2013. The IRS has definitely not made it easy for us this year! Remember all of this changes again in 2014. What we’re talking about today is ONLY good for 2013.
Let’s start by looking at so-called luxury vehicles.
- If you have a luxury vehicle (defined as a vehicle that doesn’t qualify for the over 6000 GVR exception or isn’t a qualifying truck or van), you can’t take the section 179. Or rather, there is no point. Your total depreciation is limited.
- If the vehicle is new and you have at least 50% business use, you can take bonus depreciation of 50%, subject to limitation stated in Rev Proc 2013-21.
- You can depreciate the vehicle which has 50% or more business use. Again, though, you have limitations in the amount of depreciation. You’re better off using the bonus depreciation, but this won’t be allowable if the vehicle is used.
- You can use the mileage method of 56.5 cents per mile.
Now, let’s look at the greater than 6000 GVR vehicles. This does not mean that the vehicle weighs more than 6000 pounds. It means there is a table that indicates that the vehicle can be at least 6000 pounds fully loaded. The vehicles does not need to be new to receive this special deduction.
- A heavy vehicle, that is not an otherwise qualifying vehicle (listed below), is subject to a Section 179 immediate deduction of $25,000 in 2013. The Section 179 amount reduces the basis, which can then have bonus depreciation and depreciation, provided it qualifies.
NOTE: If your business use is less than 100%, the amount that can be deducted is similarly reduced.
And finally, let’s look at the ‘special vehicles’. These vehicles are:
Ambulance or hearse used specifically in your business,
Taxis, transport vans and other vehicles used to specifically transport people,
Heavy ‘non-SUV’ with a cargo area of at last 6’ in interior length.
Vehicles that can seat 9+ passengers behind the driver’s seat, and
Vehicles with (1) fully-enclosed driver’s compartment/cargo are, (2) no seating behind driver’s seat and (3) no body section protruding more than 30” inches ahead of the leading edge.
In case of the special vehicles, you can take a full Section 179 deduction.
Remember you need to keep a vehicle log so you can identify what is business use and personal use.