If you own a business, you should know the tax rules for buying a SUV or a truck. You can and should deduct the operating expense of your vehicle if you use it for your business. But you can also deduct the cost of your SUV or truck as well.
As an SUV owner and a small business owner, this article will highlight the latest automobile tax deduction rules for 2025 and beyond. New cars, trucks, and SUVs, are incredibly expensive nowadays due to elevated inflation.
With the tax reform act passed at the end of 2017, buying a truck or an SUV that is over 6000 pounds became more favorable for 2018 and beyond. Now with Trump as president again, tax rates and deductions should continue to be favorable through 2028.
Here are the tax deduction rules for SUVs and trucks. Keep in mind some deductions are being phased out and tax rules are always subject to change.
SUV And Truck Tax Deduction Rules For A Business
Let me state up front that I'm not an accountant, but I do have an accountant. I am also a tax law enthusiast who strives to minimize his tax liability since I started working in 1999.
I've paid well over $3 million in Federal income taxes over the past 25 years. Finally, I have been a small business owner since 2009 and have had multiple SUVs. Currently, I drive a 2015 Range Rover Sport. I’m now considering buying a new Range Rover SUV on the business and take advantage of the tax deductions.
The first thing I did to understand the process of writing off a vehicle as a business expense was to go to the Range Rover dealer of course! Take a look at this SUV/Truck automobile tax deduction example for your business.
I asked the salesman what he sees most businesses doing when it comes to purchasing a vehicle. He told me, “Small businesses tend to purchase outright or finance, and large businesses tend to lease.” The idea is that large businesses who use a lot of vehicles don't want to bother with inventory management if they are not a car business.
Tax Depreciation Comparison Chart For Vehicles
The salesman showed me a special “Tax Depreciation Comparison” pamphlet (photo) that just “flies off our shelves” to highlight how much a $61,000 Range Rover Sport in 2011 (was cheaper back then) could be depreciated vs. a $61,000 luxury car which is not over 6,000 pounds.
As you can see from the picture, 95% of the Range Rover Sport could be depreciated over four years if 100% used for business vs. only 34% for a similarly priced car. The reason is based on Section 168(k) and Section 179 of the Internal Revenue Code for vehicles over 6,000 pounds (includes max load).
I thanked the salesman for the information. Then I proceeded to send my $2,000 a year tax accountant an inquiry about whether this example indeed holds true based on the latest tax laws for small businesses. Here's some of his feedback.
Automobile Tax Deduction Rule – Section 179
You can only write-off 100% if the vehicle is used 100% for business. Keep in mind, commuting from your home to and from your business in the vehicle is not considered business-use and would reduce your deduction. It's generally impossible to have 100% business use, hence the more conservative 95% depreciation used in the above example. Be sure to keep a mileage log and track what each trip is for.
Business-use encompasses traveling between job sites (not between your business location and your home), transporting goods and equipment, and any business-related travel away from your business' location.
To determine your business-use percentage, divide the total business-use miles driven by the overall total miles driven for the year. Note: the vehicle must be driven over 50% of the total miles to qualify for business use deductions. The percentage is then applied to the vehicle purchase price to determine the Section 179 deductible amount.
Bonus Depreciation, Deduction Limits, And More
Not bad! We've got a winner here if you'd like to purchase a new SUV. The IRS allows employees and self-employed individuals to use a standard mileage rate for expensing vehicles under the 6,000 pound limit, which for 2024 business driving is 67 cents per mile. See the IRS page for more details.
Bonus depreciation can also let businesses claim an additional first-year depreciation deduction on some vehicles. But the amounts are dropping. For 2024, the bonus depreciation rate is down to 60%. It will drop further down to 40% for 2025, 20% for 2026, and be phased out to 0% for 2027 onward unless changes are implemented.
Also, the Section 179 deduction begins to phase out on a dollar-for-dollar basis once your total equipment purchases go over the spending cap (2024: $1,220,000 deduction limit with a total equipment spending cap of $3,050,000).
Both new and used vehicles purchases can qualify for the Section 179 deduction though. Plus, you can still claim the deduction if you finance a vehicle, which can be helpful for cash flow.
However, from my understanding there is a reduced Section 179 limit of $30,500 for heavy vehicles like SUVs that are over 6,000 but less than 14,000 pounds. Let’s see if there are more beneficial rules when Trump starts implementing his policies.
If you can't or don't want to deduct based on mileage, you can deduct based on cost of operating the vehicle. Costs include tires, maintenance, gas and so forth. It's one or the other.
The nitty gritty can get complicated, so always check with a tax specialist for the latest details before making any tax-related decisions.
Start A Business, Take Advantage Of Automobile Tax Deduction Rules And More
So there you have it folks. The tax rules for deducting the cost of an SUV or truck are quite clear.
The reason why Land Rover has tons of Tax Depreciation pamphlets that are “flying off the shelves” is because plenty of businesses are purchasing 6,000 lbs vehicles under their business entity and writing off the expense over time due to what's allowable by tax law.
It's important to note the IRS screens small businesses based on expense and tax ratios for auditing.
For example, if your business only brings in $30,000 gross revenue a year, buying a $75,000 SUV amortized over four years is probably going to raise red flags. But if your gross business revenue is $500,000 a year, then writing off $10,000 – $45,000 a year in SUV or truck expenses sounds more reasonable.
The IRS is on the look out for small businesses that are created simply to dump lifestyle expenses into the entity to reduce income taxes.
Here are the best reasons to start an online business today. I started an online business in 2009 and have been able to deduct the operating expenses of my car. If and when I get a new SUV in 2026, I will deduct the cost of the SUV as well.
Review Tax Rules For SUVs And Cars With Your Accountant
As always, talk to your accountant before conducting any tax changes. The rules are constantly changing.
Given I prefer SUVs over cars for safety, it makes sense for me to buy a brand new vehicle under my business if it comes time to buy a new car. I'll be getting roughly a 30% discount from purchase price after considering tax deductions.
Further, with used vehicle prices so high due to the pandemic, buying a new car to then be able to deduct makes it even a better deal.
Just know the average new car price in 2024 is about $49,000. That's a lot of money to spend for the average business or household. Therefore, please buy an expensive SUV or truck just because you can deduct the cost to your business. Instead, buy an SUV or truck for its utility and necessity first, and then take advantage of the Section 179 tax deduction rule.
Tip On Avoiding Depreciation Recapture
I want to highlight a great comment from a reader who is in the commercial equipment leasing / financing industry. He provides reasons for leasing instead of purchasing.
If you want to avoid the “depreciation recapture,” and don’t want to run the vehicle into the ground, you can lease the vehicle instead. You still can expense the rental payments under your business, and at the end of the lease, you simply return it. This way you:
a) Did not spend a ton of money upfront to acquire it (conservation of capital)
b) Have written off the rental payments 100% (maximized tax write offs)
c) Don’t take a loss on selling the vehicle (prevents loss on selling a depreciated asset)
d) Aren’t stuck with an obsolete vehicle (curbs obsolescence)AND
c) If the vehicle was truly a revenue generating asset for you business (ie, you use the flashy car to gain more clients and it actually gets you more clients, or you use the truck to transport goods that you obtain and sell at a profit), then you have generated positive cash flow and have completely written off the cost of using and acquiring the vehicle!
Remember, invest in appreciating assets, lease depreciating assets!
Now imagine if you also did this with your computers, software, servers, etc.
A List Of Vehicles That Have A Gross Weight (GW) Of Over 6,000 LBS
Here's an example list of SUVs and trucks with a gross weight over 6,000 lbs. Usually each vehicle will have its weight on the side door. If you're unsure, just ask the dealer. These vehicles should qualify for the automobile tax deduction rule. But of course, double check.
European Automobiles
- Audi Q7
- BMW X5, X6
- RANGE ROVER SPORT, Discovery Sport, RANGE ROVER
- RANGE ROVER Discovery
- Mercedes Benz G550, GL 500
- Porsche CAYENNE
- Volkswagen TOUAREG HYBRID
American Automobiles
- Buick ENCLAVE
- Cadillac ESCALADE AWD Chevrolet Truck AVALANCHE 4W
- Chevrolet Truck SILVERADO, SUBURBAN, TAHOE, TRAVERSE
- Dodge Truck DURANGO 4WD
- Ford Truck EXPEDITION 4WD, EXPLORER 4WD, F-150 4WD, FLEX AWD
- GMC ACADIA 4WD, SIERRA, YUKON 4WD, YUKON XLGMC SIERRA
- Jeep GRAND CHEROKEE
- Lincoln MKT AWD
Related: How Much Of A Vehicle Expense Can You Deduct?
Japanese Automobiles
- Lexus GX460
- Lexus LX570
- Infiniti QX56 4WD
- Nissan ARMADA 4W3, NV 1500 SV6, NVP 3500 SV6, TITAN
- Toyota 4RUNNER 4WD, LANDCRUISER, SEQUOIA 4WD, TUNDRA
Of course, there are new vehicles with new modifications all the time. Double check with your car sales person to make sure the vehicle you are buying is over 6,000 lbs!
Three Finance Recommendations
1) Start A Business And Save On Taxes
A business is one of the best ways to shield your income from more taxes. You can either incorporate as an LLC, S-Corp, or simply be a Sole Proprietor. If you incorporate as a pass-through entity, be sure to check out the PTE tax election to save on your federal taxes.
As a sole prop, no incorporating is necessary. Just be a consultant and file a schedule C. Every business person can start a Self-Employed 401k where you can contribute up to $69,000 in 2024 (up to $23,000 in employee elective deferrals and up to 25% of employer compensation).
All your business-related expenses are tax deductible as well. Simply launch your own website like this one in under 30 minutes to legitimize your business. Here's my step-by-step guide to starting your own website with Bluehost.
2) Start a rental property business
As a rental property business owner, you can also deduct many expenses related to owning and operating your rental properties. Further, owning real estate today is my favorite asset class to profit from the post-pandemic recovery. Inflation whittles down the cost of debt and acts as a tailwind for your asset values.
If you don't want to invest in physical real estate, invest in real estate through Fundrise or CrowdStreet. These are the top real estate crowdfunding platforms today that are free to sign up and explore.
Fundrise focuses on diversified eREITs. It's nice to invest in a fund for 100% passive income. Fundrise has over 380,000+ investors with over $3.2 billion in capital. Fundrise was founded in 2012 and is one of the oldest crowdfunding platforms today. For most people, investing in a diversified fund is the way to go. I’ve personally invested over $300,000 in Fundrise so far.
CrowdStreet focuses on individual commercial real estate and multi-family properties in 18-hour cities. 18-hour cities like Memphis have lower valuations and potentially higher growth. If you have the capital, you can build your best-of-the-best portfolio yourself.
I've personally invested $954,000 in real estate crowdfunding across 18 projects. My goal is to take advantage of lower valuations in the heartland of America. My real estate investments account for roughly 50% of my current passive income of ~$350,000.
Financial Samurai is a six-figure investor in Fundrise funds and Fundrise is a long-time sponsor of Financial Samurai. Our investment outlooks about real estate are highly aligned.
3) Invest In Private Growth Companies
As a business owner, consider diversifying into private growth companies through an open venture capital fund. Companies are staying private for longer, as a result, more gains are accruing to private company investors. Finding the next Google or Apple before going public can be a life-changing investment.
Check out the Fundrise Venture, which invests in the following five sectors:
- Artificial Intelligence & Machine Learning
- Modern Data Infrastructure
- Development Operations (DevOps)
- Financial Technology (FinTech)
- Real Estate & Property Technology (PropTech)
Roughly 65% of Fundrise Venture is invested in artificial intelligence, which I'm extremely bullish about. In 20 years, I don't want my kids wondering why I didn't invest in AI or work in AI!
The investment minimum is also only $10. Most venture capital funds have a $250,000+ minimum.
About the Author
Sam worked in investment banking for 13 years at GS and CS. He received his undergraduate degree in Economics from The College of William & Mary and got his MBA from UC Berkeley. In 2012, Sam was able to retire at the age of 34 largely due to his investments. He spends most of his time playing tennis and taking care of his family.
Financial Samurai has been around since 2009 and is one of the largest independently-owned personal finance sites in the world. Always check with an accountant if you plan to make any big tax moves. Join 65,000+ others and sign up for my free weekly newsletter here. I am the Wall Street Journal bestseller author of Buy This Not That.
Tax Rules For Buying A SUV Or Truck To Deduct As A Business Expense is a FS original post.
I just had a client ask me if he can purchase a $210,000 SUV and write off the entire amount since it is over the 6,000 lb rule. Given the amount of personal expenses I know he runs through the company, I feel trying to push this amount through would be a red flag with a tornado siren with it, a bad idea to try to do. Your thoughts?
I am not sure I understand the saleman’s analysis on SUV over 6000lb or a car under 6000lb. I did an simulation tax run for 2019 for above 2 different cases. I see the depreciation over the 5 years are the same , both are the cost the car , $61,000 as in the example as in the article. Can anyone confirm above example is true or not?
Your article stated:
“3) Start A Business And Save On Taxes: A business is one of the best ways to shield your income from more taxes. You can either incorporate as an LLC, S-Corp, or simply be a Sole Proprietor (no incorporating necessary, just be a consultant and file a schedule C). ”
Sam, please be careful when mixing legal terms of art regarding formal business entities and IRS income Tax elections. A corporation is formed or incorporated, a Limited Liability Company is formed or organized depending on the State, not incorporated.
Corporation does not mean Company. These are two legally distinct formal business entities. Most all 50 states have statutes regarding formation of a Corporation, Limited Liability Company, Series Limited Liability Company, Partnership, Limited Partnership or Limited Liability Partnership. Formation of a formal entity is to provide segregation of business liability and shield personal assets. (absent fraud or crime)
A sole proprietorship has no segregation of assets nor does it shield personal assets from business liabilities so it is a poor choice for a business owner to make.
A Corporation in my State and most any State I know of can have liens placed upon its real and personal property and turnover proceedings against its cash accounts. For this reason, the choice of legal entity in my State Texas and most any State I do business in is a LLC or a Series LLC since they have charging order protection. In addition, a LLC or a individual Series of a Series LLC may choose (elect) how it is to be taxed. LLCs or Series of a Series LLC can choose to be taxed as a C-Corp, S-Corp, Partnership or Sole Proprietorship (no tax benefit choosing proprietorship).
Note an S-Corporation is not a choice of formal business entity it is an income tax election to the IRS. One does not form an S-Corp at their State’s SOS office. They file a income tax election to be taxed as an S-Corp. Note, only business entities that all members are US Citizens may file S-Corp election.
One needs to consult with a Asset Protection expert attorney for forming a formal entity. One needs to consult with a tax planning expert on best choice for the entity and owner/members. Do not consult with at a tax planning person on best business entity to form unless they are an attorney.
Since TCJA of 2017 the cap on C-Corp tax rate is 21%, so much lower tax rate than election of a S-Corp or Partnership pass through elections which business profits are taxed at possible higher personal tax rate.
Thanks, I was looking for a list of “Tax Cut Job Act” vehicles that qualify for bonus depreciation. 100% bonus depreciation applies to vehicles weighing 6000lbs or more loaded. So lots and lots of vehicles make the cut. Issue of purchase vs. lease is long term dependability and residual/resale values and miles per year allowed under a lease. Most business owners clock too many miles on a typical lease. Not sure what the limit is for a fleet lease? Do you know? I go with advice from car experts like Scotty Kilmer, CR, Edmunds, etc. VW, BMW, MB, Jaguar, Land Rover, and most other European brands and Renault owned Nissan, are endless money pits as they age and have miles on them. Best to lease these brands, models, and get rid of it after 36 months. Any Toyota or Honda made products (Lexus, Acura) and some Ford, GM are made to last and have a very long life no matter how old or how many miles on them.
Could we add Kia to the list of built to last? They continue to make strides in quality of product and reliability. They also back it by an industry leading 10yr/100K warranty. The Telluride has become the “Selluride” for them. Incredible value in comparison to the luxury brands.
Mr. Samurai,
I have bee searching for a comment you made on this strategy or at least I thought you did a few years back one what to do after 3 year of 179ing a vehicle? Is there a way to get the vehicle to someone else personally without paying “fair market value” after a certain period of time or something? I can swear you somehow gave it to your dad or a family member. Am I dreaming?
I heard in 2020 even a year old 6000lb vehicle eligible to tax deduction. Is it correct?
TCJA of 2017 sets out bonus depreciation for this subject. Vehicles (or equipment) do not need to be new, just new to you. For vehicles it is 6000lbs loaded, so many/most SUVs, minivan, pickups qualify.
how long must one have this car for the entire tax benefit?
For example, i bought a grand cherokee 2 years ago. I hate it and want to get rid of it.
I took the entire 25K deduction in one year.
Thanks in advance!
I’m wondering the exact same thing. I purchased a Model X a couple of years ago and wrote off the entire purchase. How long do I have to keep it without having to do recapture?
Thanks!
Planning to buy Tesla model X . Curious how did you manage to write off $100k car in 2 years ?
I heard in 2020 even a year old 6000lb vehicle eligible to tax deduction. Is it correct?
My accountant says yes. I’m looking to buy a new Tesla now. In 201, I bought a three year old Lexus LX570 and took the 25k deduction and do an annual deduction over five years.
I like it. But why a piece of crap Range Rover? Go for the much superior legendary Land Cruiser instead.
Probably just personal taste. I didn’t like the ride of the Land Cruiser or the look. I enjoyed my MB G500 though.
The Range Rover is so sweet. Never any problems too. But I do get some occasional haters for some reason. Not sure why?
Related: How To Not Have Buyer’s Remorse When Purchasing An Expensive Luxury Vehicle
Reliability. The Range Rover is known to have reliability issues and is extremely expensive to repair. The Land Cruiser is designed to last 25 years+ without issue and its track record confirms that. It’s a tank. Plus it’s much less expensive to repair. There’s a saying. Range Rovers are built to go into the jungle, the Land Cruiser is built to get you out of the jungle. Now if you just want luxury, there are better alternatives. These are purpose built vehicles.
Sounds good. Guess I’ve been lucky so far for the past 12 years with my Land Rover/Range Rovers.
Are you speaking from experience owning a Land Rover? Or just hearsay?
Why do you think the company is still around and growing so rapidly if you think the reliability is so bad?
I’ve owned several land cruisers. Will purchase a new one once the 300 is out.
Range Rovers are fine if you just want luxury and a status symbol to look fake-rugged. They have an incredible brand name which is why they still sell well. The statistics on reliability of each vehicle are readibly avail. LCs are for those who want something that will last and can handle anything thrown at it.
Got it. That makes sense why you’re so biased. I think it is important to be biased for what we buy, to prevent us from feeling bad about our purchase.
I don’t want to drive a Land Cruiser because it is too bulky, doesn’t look very good, and is old technology.
I might be biased but as I mentioned the statistics support my opinion. That said, great article. I will be using this strategy under my business.
If you could highlight the source of these statistics, instead of just saying statistics support, that would be great. I’d love to read them.
According to JD Power ratings, With 36 more problems per 100 vehicles, Land Rover is ranked 28th, below the industry average for reliability. Power ranks the Toyota fourth in reliability, above the industry average.
Good article that addresses your questions:
https://jalopnik.com/if-range-rovers-are-so-unreliable-why-do-people-still-1728727599
It’s a fun opinion piece, but I was hoping to get some reliability data etc. No worries if you can’t find anyway.
Bottom line: if you can afford a Range Rover, you can afford the car and any issues that come with it.
Just follow my 1/10th rule for car buying and you’re all set. Once a car purchase price is less than 10% of your annual gross income, the costs are not a big deal.
Most of the good reliability data comes from Consumers Reports. Unfortunately, this is subscription only. JD Power Ratings is a public source and has good info on the comparison. It confirms what I’ve already stated, Range Rover has very poor reliability in comparison to the Toyota LC.
Per current Consumers Reports – Range Rover, reliability rating 45 – “Far Below Average“. Per request for data …Land Cruiser rating 74.
A Land Cruiser is butt ugly. Further, it costs $85,000 new. To spend $85K on a butt ugly vehicle is stupid.
Further, a LC is Larger and has third row seating. You are comparing apples to oranges with the Range Rover sport.
No taste or fiscal smarts with a LC. A RR sport is way better, hence why their business is booming.
These are purpose built vehicles, not built for looks. If you’re buying for one of these for looks, you’re known as a poser.
If you have to ask the question, you won’t understand the answer. Like asking why live in Manhattan when you can live in Hoboken. People looking at Range Rovers are also looking MB, BMW, Porsche. People driving Land Cruisers clean up the kids spills after soccer practice.
Hey Sam,
I’ve been following your posts for well over a year! Big fan. Also, local SF neighbor of yours.
When it came to buy your used Range how did you expense it under business since your accountant said it has to be new?
I’d love to write off the car expense but I can’t justify buying a new range at $80k vs used one at about 60k.
I am not sure the example of solo 401K in the last chartis correct. According to my accountant, in order to contribute to solo 401K, one has to have w2 income from the LLC, partnership, inc or what ever legal business entity one has, and the receiver of the w2 income and the employer will both have to pay employment taxes for that w2 income.
Thanks for the info Sam. I have owned a business to 12 years. I just bought a new truck, over 6000 lbs with a 6.5 foot bed. It qualifies for the deduction/loophole. But I really don’t drive for work and have less that 1000 business miles per yer. It is the vehicle I wanted for personal reasons, but did not “need: for work, much like your range rover.
Truck was about the same price as your RR and I made a down payment from my business. My account tells me I should back that down payment out as a distribution because I don’t use it for more that 50% work. I was hoping for the write off or to at least make the payments from by business gross rather than personal net and effectively pay 30% less for the truck.
I also just found out today that my old truck, that was a company vehicle, is going to be taxed on the sale price. So it looks like part of the savings will eventually be reduce by taxes. My old company truck I got a steal on for $35K and it is still worth $18K 9 years later. My accountant says I will have to pay an estimated $4500 in taxes on the sale because it was fully depreciated. This seems like total BS, I have to pay taxes on something I already paid for, paid taxes on and am selling for less money than I bought it for.
So given my low low business miles, do you think it is even worth it for me to try to make my new truck a company vehicle?
Good question. This is best answered by your accountant. However, I would just focus on using your truck a higher percentage for your business than personal.
Jeff, I believe you did NOT pay taxes on the $35000 (if the vehicle was a full business expense) but did have to on the selling later price of 18k. So perhaps you didn’t pay as much as what you think?
You can gift the other truck to your son/daughter/in laws or cousins and avoid the tax bill. They would recognize the no basis as it is fully depreciated and then they can sell it whenever they want and recognize no capital gain as there is no basis. If you sold it as a business asset your are using a zero basis as it is fully depreciated and a selling price of $18,000 at 25% rate that’s your $4500 tax bill. $18,000 x .25 = $4,500.If you need the money sell it pay the $4,500 walk away with $13,500 and be done.If you can wait, gift it to your son/daughter/in-law drive it for a year sell it for 13,000.
As far as your truck for work, use it for work, even if you don’t want to. Take the free $25000 annual depreciation amount and almost 90-96% of depreciation by year 4. so your pick up saves you a bit of money as your likely in the 25% tax rate that would be a good savings. $75,00 x .25 = $18,750 so your true cost after year four is $75,000 less (-) $18,750 = $56,250 not a bad deal. Plus you get the value of your old truck when your son sells it in a year at say $13,000 so it can be as little as $43,250. However you will have to go through the painful process of gifting the truck again to a family member to avoid the recapture of your depreciated asset if you plan to sell. or as your pattern shows you keep it for 9 years and use it and love it.
Either way you have to work the tax code to save the money or just pay out of pocket the full $75,000 recognize the gain on sale of the old truck $4500 get the cash $13,500 and your new truck is now $61,500. Take the price $75,000 less (-) $13,500 your post tax value of old truck = $61,500.
Id work a bit with the accounting laws and IRS tax code of the system to have my new truck that is $75,000 to cost me only $43,250 only 57.66% of sale price vs $61,500 82.00% of sale price. Its your call, is it simple no is it possible yes. Like the Author said were he to save money if its legal and possible.
So it seems to me that the new accelerated bonus depreciation write offs for 2018 (trump’s tax plan) are less stellar than advertised..simply because of the depreciation recapture mentioned above. While you get to write off nearly the entire purchase price of a heavy SUV in the first couple of years, you still have to pay tax on the sold/trade-in value—this amounts to simply writing off the actual depreciated amount over that span.
Minus any special workarounds like the gift idea above (which seems really interesting but complex), seems like another case where there is a real tax benefit is if you want to use the car mostly for non-business needs. Then, you could buy the car in December, use it only for business while keeping a second car around for personal use, getting nearly the full amount written off after essentially 1 month of use (you could cut it even closer if you wanted).
Then, in January, sell the old car, and just use the new car normally…doesn’t matter if you use it 100% for pleasure. Because you’ve already recouped the vast majority of the real depreciation of the vehicle. You could keep the vehicle for say 3-4 years–when you sell it you do pay tax on the final amount, but this means you’ve effectively written off the difference between the purchase price and the sell price, while using it essentially 0% for business over that span! Tell me if I’m missing something here, or if auditors would go crazy over a sudden jump in business usage %….
Note that leasing is actually similar to the full depreciation scenario + depreciation capture on resell…you write off the amount of actual depreciation over the time you have the car. Downside is you only get to write off the percentage of the vehicle you use for business over that time period, whereas with the accelerated bonus on a vehicle purchase, you can use the car for much less business as long as in the ‘first calendar year’ it is mostly business.
In order to get the full deduction the vehicle has to be used for business. Once the vehicle is considered as part of the business it becomes a commercial vehicle. My insurance AAA will not cover commercial vehicles. Wondering what the difference in Premium cost would be to go to another company that would cover commercial vehicles?
I think I’m missing something in your math. If you deduct the cost of the lease per year, you are deducting 5,000 a year in operating expenses for the lease. That comes to around $417 a month when you divide 5,000 by 12. My issue is this- we’ve shopped for a range rover sport and they are more than that a month to lease. How much are you actually paying? Are you not spending another $300 a month to lease that car? And shouldn’t you include that relevant information in your article in order to best give an accurate financial picture of the cost of leasing a Range Rover and depreciating it as a business expense? Specifically, you are spending at least an additional $300 a month (that goes as a lease payment) to drive that car and for some strange reason can’t write that $300.00 off- so you are just losing it every month, yes? Also, you make no mention of car insurance. Should that also be included in the true cost analysis?
Then, we come to my other issue with your math- I thought you wrote that you could deduct 100%. Again, it costs significantly more that $417.00 a month to lease a range rover sport, yet you are only deducting a portion of the lease payment. Are you just making up numbers to illustrate your point in an effort to be helpful since you did say that you could expense 100% of the lease payments? Have I read it wrong? The math in your article just doesn’t make sense to me. How many months are you leasing your range rover? Maybe that would also help me understand your monthly payment and deductions. And are you not expensing that initial money that you put as a down payment on the lease? Maybe you added that chart after you wrote the article and are not realizing that it shows up? And if you think about the numbers in the chart, they just don’t make sense in the reality of leasing a range rover?
Hey Samurai, I’ve got a question for you. Does the IRS make any distinction or care “why” the business would need a 6000 suv for business use or is this simply a requirement to qualify for the 179 IRS deduction? I”m looking at a 65k vehicle and hoping for both the 179 deduction as well as the 25k bonus deduction for a new vehicle. Also, there seems to be much confusion about the GVW vs curb weight. Can you help me differentiate the two? I’ve seen several SUV’s listed as qualifying for the 6000 lbs weight criteria show up on the manufacturer’s website as having a curb weight less than 6000 lbs. I just don’t want to buy a massive vehicle, trying to maximize on the deductions and get stuck. Know what I mean? Thanks.
So can you write off 100% of the lease if the vehicle is in the 6000 lb. category and used for business? It wasn’t to clear in your post. Thanks
What about a certified Used Vehicle? Any tax benefits?
I just left a Honda Dealer, and the 2016 Pilot Elite 4WD/AWD was not over 6000lbs. The label on the door listed the GVWR at 5842lbs. Is there a specific model that is over 6000lbs?
I think it’s 6,096 lbs, you may need 8 passenger model
This article was originally written in 2013. The previous generation of Honda Pilot with AWD was heavier so GVWR was over 6,000 lbs. The latest generation of Honda Pilot since 2015 is lighter, so even with AWD it’s now under 6,000 lbs.
I actually bought the 2013 Pilot with AWD back in 2013, so was able to take advantage of this tax savings on our 2013 tax return. Love it. But our next vehicle can’t be a Pilot anymore. Probably will be Odyssey or Ridgeline with AWD, both of which has GVWR over 6,000 lbs still in 2017.
Maserati Levante
As far as I can tell, it appears that the section 179 deduction applies to both used AND new vehicles so your accountant may be incorrect. I also confirmed it on the IRS page and it appears to apply to both however I am not an accountant so may be missing something, so I am definitely going to confirm with my accountant before buying this used box truck i have my eye on.
Tesla Model X can be added to the list I believe.
You should add the Volvo XC90 to the list
Hey Financial samurai or others
If you decide to depreciate the vehicle over 5 years not using the 179 then can’t you write off the full amount even if it’s not 6000 lbs?
Isn’t the 179 just for maxing out first year?
Are there any limits if you wanted to deduct 100% of the vehicle as long as it’s used soley for the business?
Where did you find the list for 2016? I just left the Honda dealer and the Pilot is at 59xxlbs, just under 6000.
Thank you!
I believe this list and tax law pertains to the GVWR…
Weight calculations include curb weight, additional equipment that’s been added, the weight of cargo and the weight of passengers… everything is considered to determine if the GVWR has been exceeded. A few facts to keep in mind:
GVWR does not reflect an auto’s actual weight — it’s a limit.
Actual weight is referred to as the gross vehicle weight, or GVW, and it changes every time you put something into the auto or take something out of it, from passengers to luggage. Towing a trailer increases the GVW by the amount of weight that’s attached to the hitch, not by the entire weight of the trailer.
Let’s say your pickup truck weighs 5,000 pounds and has a GVWR of 7,000 pounds. That means you can add 2,000 pounds of people (and other cargo)
Please correct me if I am wrong.
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