Why SUVs may be a better choice than an automobile used for business?

Orange-SUV

Other than being comfy and nice to drive, SUVs may be a better choice than a car when it comes to business vehicles.

Limitations Placed on Cars

Cars are subject to more restrictive rules than those that apply to other depreciable assets and are not eligible for bonus and addition write-offs that are afforded to SUVs. This is due to the so-called “luxury auto” rules which artificially cap depreciation and expensing deductions for cars. For example, for an automobile first placed in service in 2016, the maximum depreciation deduction for the first tax year in its recovery period (i.e., 2016) is limited to $3,160; $5,100 for the second tax year; $3,050 for the third tax year; and $1,875 for each succeeding tax year. The effect is generally to extend the number of years it takes to fully depreciate the vehicle.

SUVs

SUVs may come with additional gasoline costs, but they aren’t subject to the same tax rules as cars. The regular annual depreciation and expensing caps for passenger automobiles don’t apply to trucks or vans (and that includes SUVs) that are rated at more than 6,000 pounds gross (loaded) vehicle weight. Also you may also be eligible to elect to expense up to $25,000 of the cost of the SUV in the first year and then depreciate the remainder of the cost. These tax benefits are subject to adjustment for non-business use.

Business Use

If business use of the vehicle doesn’t exceed 50% of total use, the SUV isn’t eligible for the first year expensing and has to be depreciated on a straight-line method over a six-tax-year period.

Summary

Before making the decision to purchase an SUV or car used for business, you should consult with a qualified tax professional.

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