Here’s an easy question: Do you need more 2020 tax deductions? If yes, continue on.
Next easy question: Do you need a replacement business vehicle?
If yes, you can simultaneously solve or mitigate both the first problem (needing more deductions) and the second problem (needing a replacement vehicle), but you need to get your vehicle in service on or before December 31, 2020.
To ensure compliance with the “placed in service” rule, drive the vehicle at least one business mile on or before December 31, 2020. In other words, you want to both own and drive the vehicle to ensure that it qualifies for the big deductions.
Now that you have the basics, let’s get to the tax deductions.
1. Buy a New or Used SUV, Crossover Vehicle, or Van
Let’s say that on or before December 31, 2020, you or your corporation buys and places in service a new or used SUV or crossover vehicle that the manufacturer classifies as a truck and that has a gross vehicle weight rating (GVWR) of 6,001 pounds or more. This newly purchased vehicle gives you four big benefits:
Example. On or before December 31, 2020, you buy and place in service a qualifying used $50,000 SUV for which you can claim 90 percent business use. Your business cost is $45,000 (90 percent x $50,000). Your maximum write-off for 2020 is $45,000.
2. Buy a New or Used Pickup
If you or your corporation buys and places in service a qualifying pickup truck (new or used) on or before December 31, 2020, then this newly purchased vehicle gives you four big benefits:
To qualify for full Section 179 expensing, the pickup truck must have
Short bed. If the pickup truck passes the more-than-6,000-pound-GVWR test but fails the bed-length test, tax law classifies it as an SUV. That’s not bad. The vehicle is still eligible for either expensing of up to the $25,900 SUV expensing limit or 100 percent bonus depreciation.
If you would like to discuss the vehicle strategy, please call me on my direct line at xxx-xxx-xxxx.
If you would like to discuss the vehicle strategy, please don't hesitate to contact us.
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Spencer Accounting Group, LLC does not provide investment, tax, legal, or retirement advice or recommendations in these blogs. The information presented here is not specific to any individual's personal circumstances.
Keana Spencer is an Accountant, Entrepreneur, and Educator to her clients, with a strong passion. Keana has over 10 years of experience and through her practice, she is a source of knowledge and strategies to her clients.