Buying a Business Vehicle at Year-End

Is your business considering purchasing additional vehicles?  Now may be the time to do so.

For small businesses, tax planning is a vital piece of the business process.  Many businesses fail to take advantage of important tax planning opportunities at year-end.  Using favorable depreciation regulations to your advantage by purchasing vehicles or equipment at year-end is one strategy that can help taxpayers save on their annual tax bill.

Machinery and equipment placed in service during the tax year are eligible for 100% bonus depreciation.  Vehicles placed in service during the tax year are subject to some special rules.  Rev. Proc. 2020-37 sets the first-year depreciation limit at $18,100 for a passenger automobile placed in service in 2020.  However, there is an exception to this rule which will allow you to take 100% bonus depreciation on a vehicle.

Vehicles with a gross vehicle weight rating (GVWR) of 6,000 pounds or more are not subject to the limit on first-year depreciation.  Trucks and vans are more likely to escape depreciation limits because they use a loaded GVWR, as opposed to an unloaded GVWR for passenger automobiles.  A sample of the vehicles that meet the 6,000 pound test is listed below.  More comprehensive lists can be found at websites such as www.autobytel.com, www.motortrend.com, and www.carsdirect.com.

• Chevrolet – Express (2500 & 3500), Silverado (1500, 2500HD, 3500HD), Suburban, Tahoe, Traverse
• Ford – Expedition, Explorer, F-150, F-250, F-350, F-450
• GMC – Acadia, Savana (2500 & 3500), Sierra (1500, 2500HD, 3500HD), Yukon
• Toyota – 4Runner, Land Cruiser, Sequoia
• And many more…

Don’t hesitate to reach out to your DWD professional advisors to help with your year-end tax planning needs.  Contact us today!

Contributed by: Jessica Ogle, CPA | Partner | DWD CPAs & Advisors