Understanding the 6000 Pound Vehicle Tax Credit

By Jeffrey Brooks, CPA, CFP, MBA for Jbrooks Wealth Advisors, PC, a Professional CPA and CFP Firm jeff@jbrookswa.com 602-292-2009 Please consult with your professional tax CPA regarding your specific circumstances!

Did you know that if you buy a vehicle with a Gross Vehicle Weight Rating (GVWR) over 6000 pounds on December 31, 2012 and have the vehicle delivered to your office where you drive it for business, you can write off the first $25,000 (using Section 179) even if the vehicle is used?
Warning/Alert: You must reduce the $25,000 deduction by the personal use.

I will give you an example of personal use below.

Q: How do I know what the GVWR is?
A: The label attached to the inside edge of the driver’s side door. (Make sure you get a copy of this label for your records)

Q: What if I buy this 6000 lb vehicle and use it primarily for communing? Can I take the big $25,000 write off immediately?

A: No, the vehicle must be driven over 50% of the miles for business purposes and you must reduce the $25K by the personal use. Driving miles between your home and place of work are personal miles (called “commuting”) and reduce your percentage of business miles. For example: You drive 10 miles each way for 5 days a week. If this is your only personal driving (you have another car for personal use), your personal miles would be 20 miles x 5 days a week or 100 miles personal miles for the week.
If this week is a typical week and you drive 200 miles to your customer businesses, your total miles during the week would be 300 miles.

If you work 50 weeks a year and this week is typical, you would have personal miles of 5,000 miles and 10,000 business miles. 66.667% or 2/3rd of your driving would be considered business miles.
Since your business driving miles is over 50% of your total miles, you would be eligible for $25,000 (times your business percentage) write off under Code Section 179.

The good news continues if your vehicle is new. If the vehicle is new, you would be eligible for additional bonus depreciation. Used vehicles are not eligible for bonus depreciation.

If your 6000 pound GWB vehicle cost you more than $25,000, you are eligible for not only the Code Section 179 $25,000 but additional depreciation write offs!

Q: You mention business versus personal use. Is my word good enough? Or do I need to keep records?
A: To claim these deductions, you must establish through contemporaneous records (such as, a mileage log) that you use the vehicle over 50% of the time for business.
Q: What if my business use falls below 50%? What Happens?
A: If your business usage later falls below 51%, a portion of the deductions previously claimed will need to be recaptured and reported as ordinary income in that year. Also, deductions allowable for used vehicles may be limited as such vehicles do not qualify for 100% bonus depreciation.
Q: Does it make a difference whether I am an employee versus an owner of a company?
A: Buying a SUV that weighs over 6000 pounds GWB works best if are an owner whether you are a sole proprietor, a partner who owns 2% or more of a partnership or a shareholder who owns 2% or more of a S Corporation. An employee’s auto depreciation is severely limited and increases IRS audit risk. Business use of an employee’s depreciation is recorded as an employee business expense on Schedule A of the Form 1040.

Q: What are a few of the vehicles with over 6000 lbs GWB?
Model Year 2013
2013 Audi Q7 3.0L TDI
2013 BMW X5 M
2013 BMW X6 M
2013 Buick ENCLAVE 2WD
2013 Buick ENCLAVE 4WD
2013 Cadillac ESCALADE 2WD
2013 Cadillac ESCALADE AWD
2013 Chevrolet Truck AVALANCHE 2WD
2013 Chevrolet Truck AVALANCHE 4WD
2013 Chevrolet Truck SILVERADO C1500
2013 Chevrolet Truck SILVERADO C1500
2013 Chevrolet Truck SILVERADO C2500
2013 Chevrolet Truck SILVERADO C3500
2013 Chevrolet Truck SILVERADO K1500
2013 Chevrolet Truck SILVERADO K1500
2013 Chevrolet Truck SILVERADO K2500
2013 Chevrolet Truck SILVERADO K3500
2013 Chevrolet Truck SUBURBAN C1500
2013 Chevrolet Truck SUBURBAN K1500
2013 Chevrolet Truck TAHOE 2WD LS
2013 Chevrolet Truck TAHOE 4WD LS
2013 Chevrolet Truck TAHOE HYBRID
2013 Chevrolet Truck TAHOE HYBRID
2013 Chevrolet Truck TRAVERSE 2WD
2013 Chevrolet Truck TRAVERSE 4WD
2013 Dodge Truck DURANGO 2WD
2013 Dodge Truck DURANGO 4WD
2013 Ford Truck EXPEDITION 2WD
2013 Ford Truck EXPEDITION 4WD
2013 Ford Truck EXPLORER 2WD
2013 Ford Truck EXPLORER 4WD
2013 Ford Truck F-150 2WD
2013 Ford Truck F-150 4WD
2013 Ford Truck FLEX AWD
2013 GMC SIERRA C1500
2013 GMC SIERRA C1500
2013 GMC SIERRA C1500
2013 GMC SIERRA C2500 HD
2013 GMC SIERRA C2500 HD
2013 GMC SIERRA C3500 HD
2013 GMC SIERRA C3500 HD
2013 GMC SIERRA K1500
2013 GMC SIERRA K1500
2013 GMC SIERRA K1500
2013 GMC SIERRA K2500 HD
2013 GMC SIERRA K2500 HD
2013 GMC SIERRA K3500 HD
2013 GMC SIERRA K3500 HD
2013 GMC YUKON XL C1500
2013 GMC YUKON XL K1500
2013 Honda PILOT 4WD
2013 Infiniti QX56 2WD
2013 Infiniti QX56 4WD
2013 Land Rover RANGE ROVER 4WD
2013 Land Rover RANGE ROVER SPT
2013 Lexus GX460
2013 Lexus LX570
2013 Lincoln MKT AWD
2013 Mercedes Benz G550
2013 Mercedes Benz GL350 BLUETEC
2013 Mercedes Benz ML350
2013 Nissan ARMADA 2WD
2013 Nissan ARMADA 4WD
2013 Nissan NV 1500 S V6
2013 Nissan NVP 3500 S V6
2013 Nissan TITAN 2WD S
2013 Porsche CAYENNE
2013 Toyota 4RUNNER 2WD LTD
2013 Toyota 4RUNNER 4WD LTD
2013 Toyota SEQUOIA 2WD LTD
2013 Toyota SEQUOIA 4WD LTD
2013 Toyota TUNDRA 2WD
2013 Toyota TUNDRA 4WD
2013 Volkswagen TOUAREG HYBRID

Related posts:

  1. Auto & vehicle mileage rate will increase for 2013. How to increase your write off deductions of autos & vehicles in 2012
  2. Should you rent or buy your business vehicle? Why IRS has disallowed many business owners auto or vehicle tax deductions and what you can do about it!
  3. Arizona Tax Credits 2013 Save income taxes now by donating to public and private schools, the Working Poor and The Arizona Military Family Relief
  4. When do you not have to repay your new homeowner credit? How stop paying back the New Homeowner Credit!!
  5. Vehicle (cars, trucks and vans) depreciation limits for 2012 released by IRS by Jeffrey Brooks, CPA
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About Jeffrey Brooks

Jeffrey Brooks, CPA, CFP, MBA since 1976 has specialized in helping clients save significant taxes, help businesses increase their cash flow, revenues and profits while increasing their control and satisfaction. Jeff and his accounting firm sincerely cares about the happiness of his clients.

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