SUVs Still Provide a Substantial First-Year Deduction

You may have heard that Congress tightened the loophole for writing off SUVs bought for business. Well, they tightened it, but by no means closed it. Although they did limit the Section 179 expense deduction to $25,000 for heavy SUVs, taxpayers can still get a substantial first-year write-off because the rules that limit the amount of annual depreciation that can be deducted on passenger automobiles do not apply to heavy SUVs (those with a gross or loaded vehicle weight of over 6,000 pounds and built on a truck chassis). Thus, heavy SUVs are eligible for regular depreciation allowances, on top of the $25,000 that is allowed to be expensed.

Let’s say that you bought a heavy SUV that costs $70,000 in June 2006 and used it 100% for business driving. Assuming the SUV qualified, you would be allowed a $25,000 Sec. 179 election deduction. In addition, you would be able to take normal depreciation on the balance of the purchase price, $45,000 ($70,000 - $25,000) at 20%, which results in an additional $9,000. Thus, the first-year deduction for the SUV is $34,000. If the SUV is used partially for business and partially for personal purposes, the deduction will be prorated.

As you can see, purchasing an SUV for business purposes can still yield a substantial deduction. There are other limitations applicable to the Sec. 179 deduction and business-use percentage of the vehicle. Please call if you are contemplating such a purchase, so that we may determine what the tax benefit will be for your specific circumstances.