Note: This article does not constitute tax advice. Tax law is subject to change. Talk to your tax adviser for full details.
If you are a small business owner and drive a lot for your business, an IRS tax rule could save you money.
IRS Section 179 includes a vehicle depreciation write-off for 2014. It lets you rapidly depreciate a new or pre-owned vehicle up to 60 percent of its value in your first year of ownership. Tax depreciation doesn’t mean that if you sell your vehicle, you won’t get as much money for it. It means that when it’s time to pay your federal income tax, self-employment tax, and possibly even your state income tax, your bill will be reduced.
To take advantage of this write-off, the gross vehicle weight rating—which is the weight of the car when it’s fully loaded with people and cargo—must be at least 6,000 lbs. You can usually find the GVWR on the sticker where the driver’s door closes. Vehicles with GVWR’s this high are typically heavy SUVs, trucks and vans such as the Dodge Durango or the RAM 1500.
The second qualification is that at least 50 percent of your vehicle’s miles must have been for business use. The higher the percentage of miles used for business, the more you can depreciate your vehicle for tax purposes.
An example of this would be if you bought a heavy SUV for $60,000 and used it 100 percent of the time for business. In this case, your estimated depreciation would be $36,000 ($30,000 from Section 179 and $6,000 from regular vehicle depreciation). As you can see, Section 179 reduces your tax bill on this vehicle by a factor of six.
To take advantage of Section 179 for vehicles, you must purchase your new or pre-owned vehicle before the end of 2014. Because of Section 179, within a few years your vehicle could be entirely depreciated, which would be a significant tax savings to you and your business.
Leith Chrysler Dodge Jeep RAM currently offers the following vehicles that are applicable under Section 179:
2014/2015 Dodge Durango 2WD
2014/2015 Dodge Durango 4WD
2014/2015 Jeep Grand Cherokee
2014/2015 RAM 1500
2014/2015 RAM 2500
2014/2015 RAM 3500
We encourage you to speak with your tax adviser for more information, and we hope to see you soon.
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