Special Deduction for Business Vehicles in 2022 Could Mean a Whole Lot Less Tax | USTaxAid

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Special Deduction for Business Vehicles in 2022 Could Mean a Whole Lot Less Tax

Written by Diane Kennedy, CPA on July 2, 2022

Are you thinking about buying a new vehicle in 2022? Is it one that you’ll use in your business?  If you answered both questions with “yes”, this tax break is for you!

Here’s the deal. The IRS says that certain vehicles that qualify for 100% write off in 2022. It has to do with the GVWR (gross vehicle weight rating). This is something that has been certified by the manufacturer. You can find out what the amount is for a vehicle by checking the manufacturer’s label that’s normally located on the inside edge of the driver’s side door where the door hinges meet the vehicle’s frame.

You’re looking for vehicles that are 6,000 GVWR or more.

If you buy a vehicle that qualifies as a heavy vehicle and you use it 100% in a business, then you can write off the entire amount against your taxes in 2022.

Beware Bad Online Tax Information

If you look online, you may find some blogs and articles that talk about Section 179. This is a code section that allows you to take a one-time immediate deduction. Back in 2018, the Section 179 amount allowed for heavy vehicles was $18,100. Over time this has been gradually increased. The most recent increase was to $26,200 which has been applicable since 2021 tax year.

The maximum Section 179 deduction is NOT $18,000 for vehicles like many articles report. The Maximum Section 179 deduction for heavy vehicles is $26,200 in 2022.

The Section 179 is NOT the only way to write off heavy vehicles. You can use Section 179 in combination with Bonus Depreciation for a total of 100% of the purchase price. In 2023, bonus depreciation is scheduled to decrease to 80%, so you won’t get a full immediate deduction.

Make sure you get current, accurate information when you research online. This blog was written in July 2022 for the 2022 tax year. Always check dates for blogs and make sure a qualified expert has researched the information.

Popular SUVs and Trucks That Qualify in 2022

Audi                     Q7, SQ7, Q8, SQ8

BMW                   X5 M, X5 XDRIVE 35I, X6M, X6 XDRIVE35I, X7

Bentley                BENTAYGA

Buick                   Enclave 2WD/4WD

Cadillac               Escalade 2WD, XT5, XT6

Chevrolet            Colorado 2.8L AWD, Silverado C1500, C2500, C3500,

K1500 and K2500, Suburban C1500, K1500, Blazer,

Tahoe 2WD LS, 4WD LS, and Hybrid, Traverse 2WD &

4WD

Chrysler              Pacific and Pacific Hybrid

Dodge                 Durango 2WD/4WD, Grand Caravan

Ford                     Expedition 2WD/4WD, Explorer 2WD/4WD, Ford F-150,

Flex AWD

GMC                    Acadia 2WD/4WD, Sierra C1500, C2500 HD, C3500 HD,

K1500, K2500 HD, K3500 HD, Yukon 2WD/4WD, Hybrid,

XL C1500, XL K1500

Honda                 Pilot 4WD, Odyssey, Ridgeline AWD

Inifiniti                  QX 80, QX 60

Jeep                    Grand Cherokee, Gladiator Rubicon

Land Rover         Rover 4WD, Rover SPT, Discovery, Defender

Lexus                  GX460, LX570

Lincoln                MKT AWD, Navigator, Aviator

Mercedes Benz  G550, GLS, GLE, Metris, Sprinter

Nissan                 Armada 2WD/4WD, NV 1500 S V6, NVP 3500 S V6,

Titan 2WD S

Porsche              Cayenne

RAM                    Promaster 1500-3500, RAM 1500 & up

Subaru                ASCENT

Tesla                   Model X

Toyota                 4RUNNER 2WD/4WD LTD, Landcruiser, Sequoia 2WD/4WD LTD, Tundra 2WD/4WD

Requirements to Write Off 100% of Your Heavy Vehicle

Not every vehicle you buy will get the 100% write-off. Let’s look at the requirements:

You must have an active business.

Your vehicle must be used in the business. If it’s used less than 100% for business, you will need to prorate the deduction.

You must keep required vehicle logs.

Your vehicle must be greater than 6000 GVWR or qualify for the “other Section 179” deduction category below.

You must own the vehicle.

It is okay to be making payments on the vehicle. It’s okay if you buy a used vehicle. You cannot take the deduction if you lease the vehicle. .

You cannot take a mileage deduction plus fully write off the vehicle.

Other Section 179 Vehicle Deductions

Currently (2022), you can take bonus depreciation of 100% for  the additional deduction above and beyond the Section 179 limit. Bonus depreciation is scheduled to revert back to lower amounts in 2023, however.

That’s why taking advantage of the heavy vehicle deduction is so important before 12/31/2022.

There are some exceptions to the Section 179 limitation though. With these vehicles, you can take a full 100% Section 179 deduction.

You can take the full Section 179 deduction for vehicles meeting these exceptions, so there is no need to use  bonus depreciation. That means these vehicles will continue to get the full write-off, even after 12/31/2022:

Vehicles with GVWR over 14,000 lbs,

Vehicles that have more than 9 passengers behind the driver’s seat,

Vehicles having a cargo area of at least 6’ in length and  not readily accessible from the passenger compartment, and

Vehicles having an integral enclosure fully enclosing the driver compartment.

As with all tax planning ideas, check with a qualified tax professional to make sure the strategy will work for you.

The fastest and most cost-efficient way to get your question answered is to join Wednesday Coaching. You can ask your questions live during the 1st – 4th Wednesday sessions at 5 pm Pacific or send in a question to Diane at Coaching@USTaxAid.com.

2 Comments

  1. I am a Real Estate Broker; I want to purchase a Toyota 4 runner which has a GV weight of 6,100 lbs. The price will be $39,000. I will use it exclusively for my business. Can I write off the entire $26,200 this year?
    James

  2. Diane Kennedy says:

    Hi James:

    For 2022, you can get 100% of a write off for a heavy vehicle that is used exclusively for business. That’s by using a combination of the Section 179 + bonus depreciation.

    Next year (2023), the bonus depreciation will drop so you get a good deduction, just not the whole thing.

    ie… Buy now! (BTW I have a Toyota Tacoma, off road vehicle. I love Toyotas)

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