Business-related vehicle expenses can be deducted using the mileage-rate method (57.5 cents per mile driven in 2015) or the actual-cost method (total out-of-pocket expenses for fuel, insurance and repairs, plus depreciation).
Purchases of new or used vehicles may be eligible for Sec. 179 expensing. However, many rules and limits apply. For example, the normal Sec. 179 expensing limit generally applies to vehicles weighing more than 14,000 pounds. Even when the normal Sec. 179 expensing limit is higher, a $25,000 limit applies to SUVs weighing more than 6,000 pounds but no more than 14,000 pounds.
Vehicles weighing 6,000 pounds or less don’t satisfy the SUV definition and thus are subject to the passenger automobile limits. For autos placed in service in 2015, the depreciation limit is $3,160. The amount that may be deducted under the combination of MACRS and Sec. 179 rules for the first year is limited under the luxury auto rules.
In addition, if a vehicle is used for business and personal purposes, the associated expenses, including depreciation, must be allocated between deductible business use and nondeductible personal use. The depreciation limit is reduced if the business use is less than 100%. If business use is 50% or less, you can’t use Sec. 179 expensing or the accelerated regular MACRS; you must use the straightline method.
For guidance in better understanding your business expenses and how to best utilize this deduction, contact a tax advisor at LGT today.
Seek the services of a legal or tax adviser before implementing any ideas contained in this blog. To reach a financial advisor at Lane Gorman Trubitt PLLC, call (214) 871.7500 or email firstname.lastname@example.org.