Deutsch: Gelber Geländewagen Hummer. (Photo credit: Wikipedia)
Car Dealer uses "Hummer Tax Loophole" to Educate Commercial Vehicle Buyers and Close More Deals In December
I received the following commercial vehicle buyer targeted explanation of the tax advantages businesses can gain by purchasing one or more new vehicles before December 31st. I received in my overcrowded Gmail inbox, where it caught my attention and I found it to be so compelling that it merited being shared with the ADM Community... The dealer group that sent it to me is theResnick Automotive Group of Schaumburg, Illinois. I also added several sections with further detail directly from the IRS towards the bottom of this post:
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The IRS has not yet released guidance concerning Section 179 and Bonus Depreciation as it relates to vehicles for the year 2013. The guidance will be published in the Internal Revenue Bulletin sometime after April 15th. So be patient, and check back here often for the release date.
There are a number of qualifications for vehicles, all with varying tax treatment. Please refer to page 6 of these Instructions for Form 2106 to read the exact IRS language.
For passenger vehicles, trucks, and vans (not meeting the guidelines below), that are used more than 50% in a qualified business use, the total deduction for depreciation including both the Section 179 expense deduction as well as Bonus Depreciation is limited to $11,060 for cars and $11,160 for trucks and vans.
Exceptions include the following vehicles:
- Ambulance or hearse used specifically in your business;
- Taxis, transport vans, and other vehicles used to specifically transport people or property for hire;
- Qualified non-personal use vehicles specifically modified for business (i.e. van without seating behind driver, permanent shelving installed, and exterior painted with company’s name).
Limits for SUVs or Crossover Vehicles with GVWR above 6,000lbs
Certain vehicles (with a gross vehicle weight rating above 6,000 lbs but no more than 14,000 lbs) qualify for expensing up to $25,000 if the vehicle is financed and placed in service prior to December 31 and meet other conditions.
Many vehicles that by their nature are not likely to be used for personal purposes qualify for full Section 179 deduction including the following vehicles:
- Heavy “non-SUV” vehicles with a cargo area at least six feet in interior length (this area must not be easily accessible from the passenger area.) To give an example, many pickups with full-sized cargo beds will qualify (although some "extended cab" pickups may have beds that are too small to qualify).
- Vehicles that can seat nine-plus passengers behind the driver's seat (i.e.: Hotel / Airport shuttle vans, etc.).
- Vehicles with: (1) a fully-enclosed driver's compartment / cargo area, (2) no seating at all behind the driver's seat, and (3) no body section protruding more than 30 inches ahead of the leading edge of the windshield. In other words, a classic cargo van.
- Vehicles can be new or used (“new to you” is the key).
- The vehicle can be financed with certain leases and loans, or bought outright.
- The vehicle in question must also be used for business at least 50% of the time - and these depreciation limits are reduced by the corresponding % of personal use if the vehicle is used for business less than 100% of the time.
- Remember, you can only claim Section 179 in the tax year that the vehicle is "placed in service" - meaning when the vehicle is ready and available - even if you're not using the vehicle. Further, a vehicle first used for personal purposes doesn't qualify in a later year if its purpose changes to business.
