First of all, here’s the warning.
Do NOT buy something you don’t really want or need just for the tax write-off. If you pay 40% tax (blended rate), that means for every $100 you spend, you get $40 back from the tax deduction. That’s not a good investment. A 40% return of your money and you end up with a depreciating asset you don’t really even care about.
IF you are looking for a new vehicle anyway, consider whether a “heavy” vehicle makes sense for you. With the new flex fuel options, you can get a 4×4 that gets decent gas mileage. And if your lifestyle or location means that a 4×4 makes sense, than the rest of this info is for you.
With the new 100% bonus depreciation and the old (still in existence) Section 179, a heavy vehicle is a 100% deduction.
A heavy vehicle is a vehicle that has a GVWR of greater than 6,000 lbs. That doesn’t mean it weighs 6,000 pounds. It means it is rated to that level. You can find out by looking at the door frame of the car or asking the guy who wants to sell it to you. You can also find it out online by googling. Most 4×4 trucks and larger SUVs will qualify.
You have to buy it, not just lease it. It’s okay to finance it, with little to zero down. Just don’t lease it. This won’t work with that.
Once you buy it, you then can take a Section 179 deduction of $25,000 and then a bonus depreciation for the rest.
The vehicle does not need to be new.
In the right circumstances, this can be a great way to buy a vehicle and take a full write-off right away, even if you didn’t pay out much cash for it upfront.
For more strategies like this, make sure you check out the weekly blogs at USTaxAid and stay in touch through the emails.
If you have a question about this or other strategies I talk about, here are a couple of ways to get your question answered:
Go to the Facebook group at Diane Kennedy’s US Tax Aid, or
Go to “Got a question?” on USTaxAid.com
And of course, you can always join one of our twice monthly coaching sessions and ask there.
The link to join is https://www.ustaxaid.com/coaching-program/.