Vehicle Expense Deductions

Gregory J. Cook, EA, CPA+ Accredited Tax Advisor Past President Alabama Society of Enrolled Agents Past President Alabama Association of Accountants

"Depreciation deductions for most cars and trucks are limited by the "luxury car/passenger vehicle" limitations imposed by the IRS under Code Section 280(f). However, certain vans and trucks are not subject to this restricted write-off. Vehicles with a Gross Vehicle Weight Rating (GVWR) greater than 6,000 lbs. avoid these caps or limits and may be treated like 5 Year machinery and equipment".

If your truck or van exceeds 6,000 lbs in gross vehicle weight rating, the full depreciation deduction is allowed. You can even use the Section 179 expensing election and take up to $100,000 in the first year -- plus the regular depreciation deduction on the remaining balance.

President Bush signed a law on October 22, 2004 that closed "the SUV loophole". Now there is a $25,000 limit instead of the $100,000 limit on Sec. 179 write-off for Sport Utility Vehicles (SUV's).

How can you find out if the vehicle exceeds the 6,000 lb weight test? Take a look at the plate inside the driver-side door jam for (GVWR).

More good news if you lease the vehicle -- the lease inclusion tables do not apply if the weight limits are exceeded. So, you can write-off the entire lease costs (at the business use percentage) and not have to reduce your lease payments by the yearly lease inclusion limitation.

Car and Truck Expenses
If you use your car or truck in your business, you can deduct the costs of operating and maintaining it. You generally can deduct either your actual expenses or the standard mileage rate.

Actual expenses. If you deduct actual expenses, you can deduct the cost of the following items:

Depreciation	Lease payments	Rental fees
Garage rent	Licenses	Repairs
Gas	Oil	Tires
Insurance	Parking fees	Tolls

If you use your vehicle for both business and personal purposes, you must divide your expenses between business and personal use. You can divide based on the miles driven for each purpose.

Example. You are the sole proprietor of a flower shop. You drove your van 20,000 miles during the year. 16,000 miles were for delivering flowers to customers and 4,000 miles were for personal use. You can claim only 80% (16,000 ÷ 20,000) of the cost of operating your van as a business expense.

Standard mileage rate. Instead of figuring actual expenses, you may be able to use the standard mileage rate to figure the deductible costs of operating your car, van, pickup, or panel truck for business purposes. You can use the standard mileage rate for a vehicle you own or lease. The standard mileage rate is a specified amount of money you can deduct for each business mile you drive. It is announced annually by the IRS. To figure your deduction, multiply your business miles by the standard mileage rate for the year.

Complete list of trucks, vans and suv's that qualify for the Section 179 tax write-off in the year of purchase.