Cars, SUV, Pick up Trucks and Cargo Vans…here is how to get the most out of your purchase.

Do you need a replacement business car, SUV, van, or pickup truck?
Do you need tax deductions this year? I mean, who doesn’t right?

If you answered yes to both questions, you are going to love this…

According to the TCJA tax reform, its now easier to write off a vehicle purchase easier than ever before—including, in, up to 100% of the cost in 2021.

Get the Timing Right

Don’t procrastinate. If you want the vehicle deduction, you need to

own the vehicle
place it in business service on or before December 31, 2021.

Placed in service rule: Drive the vehicle at least one business mile on or before December 31, 2021.

Now that you have the basics, let’s get to the tax deductions.

Buy a New or Used SUV, Crossover Vehicle, or Van

Let’s say that on or before December 31, 2021, you or your S corporation buys and places in service a new or used SUV or crossover vehicle (6,001+ pounds per the manufacturer) This newly purchased vehicle gives you four big benefits:

The ability to elect bonus depreciation of 100%, Again thank you TCJA
The ability to select Section 179 expensing of up to $26,200
MACRS depreciation using the five-year table
No luxury limits on vehicle depreciation deductions

Yep, that’s right! Ladies and Gents, bonus depreciation applies to both new and used property.

If you don’t want 100% bonus depreciation in 2021, you can take three steps:

Elect out of bonus depreciation for that property class.
Expense any portion of the business cost of up to $26,200 using Section 179.
Take the remaining cost using MACRS depreciation over five years.

Most SUVs, crossover vehicles, and vans fall into the 6,001+ pound category, or more qualify as trucks for purposes of both 100% bonus depreciation and the up-to-$26,200 Section 179 expensing election.

Buy a New or Used Pickup

If you or your corporation buys and places in service a qualifying pickup truck (new or used) on or before December 31, 2021, then this newly purchased vehicle gives you four big benefits:

Bonus depreciation of up to 100 percent
Section 179 expensing of up to $1,050,000
MACRS depreciation using the five-year table
No luxury limits on vehicle depreciation deductions

To qualify for full Section 179 expensing, the pickup truck must have

6000 pounds or more
a cargo area of at least six feet in interior length, not easily accessible from the passenger compartment.

Short bed. If the pickup truck weighs more than 6000 pounds but doesn’t meet the bed length, the IRS considers it an SUV. No Worries! The vehicle is still eligible for either expensing up to the $26,200 SUV limit or 100% bonus depreciation.

Buy a New or Used Qualifying Cargo or Passenger Van

A new or used cargo or passenger van of more than 6,000 pounds that is bought and placed in service on or before December 31, 2021, can qualify for four big tax benefits as well:

Bonus depreciation of 100 percent
Section 179 expensing of up to $1,050,000
MACRS depreciation using the five-year table
No luxury limits on vehicle depreciation deductions

Cargo van. To qualify for either 100 percent bonus depreciation or up to $1,050,000 in full Section 179 expensing, the cargo van must

Be 6000 pounds or more
Fully enclose the driver compartment and load-carrying area;
Have no seating behind the driver’s seat;
No body section that protrudes more than 30 inches ahead of the leading edge of the windshield.

If the van fails many of these requirements it will be qualified an SUV.

Minivans. Many of the vans that you used to think of as minivans now have GVWRs greater than 6,000 pounds and thus qualify as SUVs for the Section 179 deduction and 100 percent bonus depreciation as explained in solution number 1 above.

Passenger van. If the van has a GVWR of greater than 6,000 pounds and seats more than nine people behind the driver’s seat, tax law defines it as a passenger van, not an SUV, and it qualifies for full Section 179 expensing of up to $1,050,000 and 100 percent bonus depreciation.

Buy a Depreciation-Limited New or Used Car

If you or your corporation buys and places in service a new or used passenger vehicle such as a car (anything less than 6000 pounds) on or before December 31, 2021, then you or your corporation may claim up to $8,000 in bonus depreciation.

The TCJA increased the luxury passenger vehicle depreciation limits and also indexed them for inflation.

The 2021 limits are:

$10,200 for the first taxable year;
$16,400 for the second taxable year;
$9,800 for the third taxable year;
$5,860 for each succeeding year.

Something of Note: The limit does not come into pay if you spend less than $51,000 for your depreciation-limited vehicle.

If you choose, you can spend $59,000 and not worry about the limits if you are claiming bonus depreciation. Keeping in mind that the limits are annual and that your maximum first-year deduction is $18,200 on a depreciation-limited vehicle.

Something Else of Note: If you want the big deductions, forget the depreciation-limited vehicles.