In our last post on bonus depreciation, we noted that there are special rules for depreciating cars and trucks. Today we’ll look at those rules. This discussion assumes that the vehicle is being used more than 50% for business purposes. If the business use is less than 50%, additional restrictions not discussed below may apply.
“Luxury auto” depreciation limitations
Cars and light trucks are generally considered 5-year property. However, due to the “luxury auto” limitations, it could take far longer to recover the cost of an auto or light truck.
A “luxury auto” is a four-wheeled vehicle which is manufactured primarily for use on public roads and is rated at an unloaded gross vehicle weight rating (GVWR) of 6,000 pounds or less. For a truck or van, the 6,000 pound weight test is applied to the truck’s gross (loaded) vehicle weight rather than its unloaded gross vehicle weight. The GVWR of a vehicle can be found at the manufacturer’s website, or at sites like edmunds.com. Ambulances, hearses, taxis, limousines, and certain other vehicles which typically aren’t used for personal purposes are exempt from this definition.
Autos and light trucks placed in service in 2013 are depreciated as follows:
| Depreciation year | Autos | Trucks & vans |
| 1st tax year | $3,160 (or $11,160) | $3,360 (or $11,360) |
| 2nd tax year | $5,100 | $5,400 |
| 3rd tax year | $3,050 | $3,250 |
| Each succeeding tax year | $1,875 | $1,975 |
The first year deduction is $3,160 for cars or $3,360 for trucks and vans, but can be $8,000 higher if the purchase qualifies for Section 179 expensing or bonus depreciation.
For a car with a cost of $30,560 (hardly a luxury in today’s market) which qualifies for Section 179 or bonus depreciation, it would take nine years to fully deduct the cost.
Note that your deduction is also affected by personal use. For example, a car eligible for bonus depreciation and used 80% for business purposes would get a deduction of $8,928 in the first year ($11,160 X 80%).
Other options
In our next post we’ll look at the deductions available for SUVs and trucks over 6,000 pounds.
Please Note: The information contained in this blog, including comments posted by visitors, is provided for informational purposes only and should not be construed as financial advice on any subject matter. It is not intended to be a substitute for obtaining accounting, tax, or other financial advice from an appropriate professional adviser.
IRS Circular 230 Disclaimer: Any advice contained in this blog is not intended or written to be used and cannot be used for the purpose of avoiding any tax penalties that may be imposed under federal law or promoting, marketing or recommending to another party any transaction or matter addressed herein.
Leave a Reply