Last September, I wrote a blog about how to get 100% write-off for a new heavy SUV (loaded gross vehicle weight greater than 6,000 pounds) through the use of the bonus depreciation rules in 2011. Well, even though I might still be finishing up tax work for 2011, the rest of the world has moved on to 2012 and, unfortunately, bonus depreciation has been reduced to 50%. The good news is that it is still possible to write-off a significant amount of a heavy SUV in the first year through a combination of deductions. Here’s how….
In addition to the use of bonus depreciation, Section 179 provides for a special deduction of up to $25,000 per vehicle for heavy SUVs. To qualify for Section 179, there are overall expense, qualifying property, and business income limits, so it is important to review those requirements before claiming the deduction.
Finally, after taking Section 179 and 50% bonus depreciation, the remaining balance is depreciated over a 5-year period using MACRS (regular) depreciation, which is 20% in the first year. It is important to note that these deductions are required to be taken in the following order:
• Section 179
• 50% Bonus Depreciation
• Regular Depreciation
To illustrate, a new heavy SUV used 100% for business that costs $60,000 and qualifies for Section 179 could be written-off in 2012 as follows:
Section 179: $25,000
Bonus Depreciation (50% of remaining balance): 17,500
Regular Depreciation (20% of remaining balance): 3,500
Total First-Year Write-Off: $46,000
The remaining $14,000 would be recovered in years 2 through 5 by means of regular depreciation.
Pass this information on to your sales team…it just might just be the tool they need to close a deal.
Edward Hooper, CPA