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Purchasing a New Company Vehicle? Consider an SUV.


The recent American Taxpayer Relief Act of 2012 contained many favorable tax provisions, including the extension of 50% bonus depreciation and an increase in Section 179 expense to $500,000.  This can have a significant impact if you are looking to replace your corporate vehicles.  Unknown to many taxpayers, certain SUVs are eligible for many of these favorable depreciation provisions.  Specifically, new “heavy” SUVs are eligible for 50% bonus depreciation and $25,000 of Section 179 expense.  An SUV is considered heavy if it has a gross vehicle weight rating of more than 6,000 pounds.  This means that taxpayers can write-off a large percentage of a qualifying vehicle’s cost during the first year it is placed in service.  For example, a qualifying $60,000 SUV used 100% for business can generate $46,000 of depreciation deductions.  This is calculated as follows:

In contrast, a lighter passenger automobile does not provide the same tax benefit.  For a $60,000 new vehicle under 6,000 pounds, taxpayers are limited to a maximum $11,160 depreciation deduction (as compared to $46,000 for a heavy SUV) for the first year. First year depreciation for a used vehicle is limited to $3,160.

Please note that used vehicles are not eligible for bonus depreciation.