Wednesday, April 02, 2008

Big tax breaks for vehicles over 6000lbs for small business?

So we took this tax class and the accountant has a lot of useful tips for small business. The class was geared towards Ignite associates and I need to chew into some of these before I teach this to my downline. From what I read, this looks fantastic.

My car is 1999 with almost 80k miles. Jess feels I should buy a car when I need it but I think I should buy a car when it's cheap. I know I need a car in 3 years so why not buy it now as I get more discounts from my work, my dad's GM card, and this write-off which is for 2008 only. Also might even get more for my trade in vs in 3 years ( maybe not. it's old).

Just like when we got tile for the house. the carpet was new but we wanted the tile sooner or later. Might as well sooner since we can enjoy it longer before we move eventually.

Now the problem is, what GVWR vehicle over 6,000lbs do I really want. I gotta do the gas cost but my galant in city only gets 20mpg at best. Not bad but not good either. I think I would use this vehicle 50-80% as I only drive 3 miles to my park and ride and all other times is to take out clients or hold trainings after the kids sleep. So many numbers. What is pretty nerdy is I kinda like it. Maybe I should have gotten an accounting degree. Or maybe not since they take business calculus. hahahahh. ziiiiing to you jess ;)
Bonus Depreciation Means Bigger First-Year Write-Offs for Politically Incorrect Heavy SUVs, Too

As you may know, the maximum Section 179 deduction for one of those gas-guzzling heavy SUVs is $25,000. Congress keeps making noise about completely eliminating the Section 179 deduction for environmental reasons, but it hasn't happened yet. In fact, the 50% first-year bonus depreciation break combined with the $25,000 Section 179 deduction turns heavy SUVs into really great tax-saving machines.

Example 4: Say your small business uses the calendar year for tax purposes. During 2008, you buy a new $65,000 Cadillac Escalade and use it 80% for business. So the depreciable cost of the vehicle is $52,000 (.8 x $65,000). On your 2008 business tax return or form, you can claim a $25,000 Section 179 deduction. Then you can write off another $13,500 under the 50% first-year bonus depreciation rule [($52,000 - $25,000) x .5 = $13,500]. Finally, you can generally write off another $2,700 under the normal depreciation rules [($52,000 - $25,000 - $13,500) x .2 = $2,700]. When all is said and done, your first-year depreciation deductions add up to $41,200, which is 79% of the business portion of the vehicle's cost.

Key Point: To qualify for Section 179 deduction and 50% first-year bonus depreciation privileges you must use the SUV over 50% for business, and it must have a gross vehicle weight rating (GVWR) of more than 6,000 pounds. You can usually find the GVWR on an imprinted label on the inside of the driver's door where the hinges meet the frame.