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 The Tax Cuts and Jobs Act has dozens of ‘wins’ for small business owners – including one if you’ve purchased a new vehicle.

If you purchase a passenger vehicle, truck, or SUV (new or new-to-you) and it is used for at least 50% business, there are super-favorable changes – especially for SUVs, pickups and vans. There are a lot of details to this new provision, but the bottom line: this is a favorable tax change for small businesses and the owners. Passenger vehicles The luxury auto depreciation allowance increased significantly under the 2018 TCJA. In year one, you may write of as much as $18,000 of the purchase price, depending on the percentage used for business. This is a large jump over previous years. 

Example: If you use the vehicle for 100% for business, you could qualify to write off the full $18,000. If you use it for 50% business and 50% personal, you will be allowed to write off only $9,000. The write-off amounts decrease each year until the vehicle is fully depreciated. Heavy SUVs, pickups and vans This law change is even better if you purchased an SUV, truck or van, as the IRS classifies these as transportation equipment and not passenger vehicles. The new law allows you to write off up to 100% of the purchase price in the first year. Under prior law, the first-year depreciation rate was only 50% and not allowed for used assets. Example: If you’ve purchased a $40,000 pickup and use it 100% for business – you could qualify for the entire $40,000 deduction. If you use it for 60% business, you would qualify for up to a $24,000 deduction. These assets would also follow the same type of depreciation schedule as passenger vehicles, until the asset is fully depreciated. So the good news: if you’ve purchased a vehicle and you’re primarily using it for work, this new law will save you money. The bad news: there will be added paperwork on your end, as you’ll have to keep track of all personal miles and submit accordingly. There’s always a catch! Call us to ask questions or to alert the office that you think you may qualify.