Purchased A New Vehicle Before Year-end?

If you like so many Americans, rushed to car dealers to take advantage of the year end deals, you may be in luck to take advantage of some tax savings, too. Be sure to tell your tax advisor about your purchase so you can claim the 50% bonus depreciation and Section 179 deductions for luxury autos, light pickups and vans, and “heavy” SUVs, pickups, and vans.

2009 depreciation rules increase the first year depreciation deduction ordinarily allowed on luxury autos and light pickups and vans by $8,000. The catch is that these vehicles must have been purchased new, not used, and placed in service before January 1, 2010. So, hopefully you didn’t wait because rules are changed for 2010.

The IRS defines a vehicle as a “heavy” SUV if it weighs between 6,000 and 14,000 pounds. By making a Section 179 election on these purchases, taxpayers can deduct $25,000 per vehicle in 2009 (limited to $250,000 total). This election is available when purchasing new or used vehicles, but cannot be applied to the portion of the vehicle paid for by trade-in and depreciation must be recaptured from previous years if business use falls under 50% at any point.

If you purchased a new or used luxury auto, light pickup or van, or “heavy” SUV, pickup, or van prior to the year-end, for business use, most, if not all, of the vehicle’s cost should be able to be written off on your 2009 tax return.