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2010 year end vehicle tax tips - Buy a new car

December 9, 2010

If you are self-employed or own your own corporation, partnership, or LLC you or your corporation may be able claim up to $8,000 in bonus depreciation on a new (not used) car purchased and placed in service before midnight on December 31, 2010.You add the $8,000 to the $3,060 luxury limit for a 2010 limit of $11,060. To get to this limit, you can use a combination of Section 179 expensing and depreciation. You reduce the $11,060 limit by personal use. Example. If business use is 80 percent, then your limit is $8,848 (80 percent times $11,060). The dealer's demonstrator vehicle qualifies as a "new" car eligible for bonus depreciation. Buy a New SUV or Crossover Vehicle with a GVWR of 6,001 Pounds or More You can qualify for these three tax breaks if you purchase and place in service before midnight on December 31, 2010, a new sport utility vehicle (SUV) or crossover vehicle with a gross vehicle weight rating (GVWR) of more than 6,000 pounds: Expensing of up to $25,000 Fifty percent bonus depreciation on amounts not expensed MACRS depreciation on the balance remaining after application of breaks 1 and 2, above Example. Before midnight on December 31, 2010, you buy and place in service a $50,000 qualifying SUV for which you can claim 90 percent business use. Your business cost is $45,000 (90 percent times $50,000). Your 2010 write-off is $35,500, computed as follows: $25,000 in Section 179 expensing $10,000 in bonus depreciation (50 percent times $20,000 remaining basis) $500 (assuming 5 percent mid-quarter MACRS applies, which is likely), computed as follows: $10,000 remaining basis times 5 percentShould you desire, you may expense less than the $35,500. The $35,500 is the probable maximum deduction on this vehicle that was purchased in the fourth quarter of the year and represents 90 percent business use. As with any tax decision there are many variables that can effect these computations. If you would like to discuss your specific situation please give us a call.

   

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