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AV Owners Federal Tax Break

Well, this sounded too good to be true so I spent a few hours today reading IRS publication 946 on http://www.irs.gov. (I also attached the PDF here.)

Some things I learned:

Vehicles use a 5-year property depreciation value. For example, if you use it for business 100% of the time, you'd deduct 1/5 of the purchase price each year for five years.

$24,000 is the maximum total property depreciation amount you can claim for one year (not for a single item). BTW, this goes up to $25000 in 2003.

You have to use the vehicle for business at least 50% of the time the FIRST YEAR that you purchase it. If not, it doesn't qualify.

If you use the vehicle less than 50% of the time every other year, the difference gets calculated as income. This is called a recapture amount and lowers your deduction.

These were some hilights, but I'm no tax lawyer so don't take my word for it. The publication is over 100 pages long and covers much more than just vehicle deductions. I learned more about my software purchases that will help me than I did about my Av purchase, since I wouldn't use the Av enough for my business to qualify.

Oh yeah, and putting a logo for your business on your Av doesn't make it a business-use vehicle. :mad:


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Guys, I'm a CPA and an Avalanche fan. My dad has a 1500 Avalanche. Very nice truck!! I'm stuck with a C5 and did have a 2500HD with the 6.0L motor up until a few weeks ago when the gas mileage killed me and I traded in for a Pontiac Vibe GT. Be gentle!! :D

Anyway, the Section 179 deduction is good for $24k this year and $25k next year. It is a way to expense a significant portion of your purchase in a given year. On top of this, you get a 9/11 incentive which is a bonus 30% depreciation taken on the remainder of your purchase price. Finally, the remainder is depreciated using the regular 5 year MACRS tables which isn't exactly 20% a year as someone above mentioned. It's a different percentage each year.

Another thing, the 6000lbs is based on Gross vehicle weight, so both the 1500 and 2500 Avalanche apply. You have to own a small business (or a big one!) and use the vehicle for atleast 50% business in order to qualify.

My brother owns a lawn care business, so I've researched this stuff for him. It's a very good deal. Know that the Section 179 limit applies to all purchases, so it's not $24k an item, but $24k total. So if you buy a $40k truck, a $10k other piece of equipment, blah, blah, you only get $24k and can take it wherever you want.

If you have any other questions, shoot me an e-mail at cswells@weaverandtidwell.com which is where I work in North Dallas. Thanks!!
 
Quikag is correct. I just formed my side company last week for $50 and am going to use the AV as this writeoff as I didn't have enough other new equipment to write off under my other business. There is of course no limit to the number of companies anyone can own. I had to decide to purchase a new pontoon boat and go into the boat rental business or purchase the truck and use as a chase car for the sandbuggies. I bought the truck this year and will form another small business next year for the boat. It only takes a minute or two at the city hall to get a small business license...and I'll bet they are open the 31st till at least noon....
Also, I found an additional $500 rebate when I bought the truck. If you have a GM credit card all you have to do is say you have a relative that works for, or is retired from GM. I do, but I'm sure everyone does also. There was no verification, and I got $238 off from the card plus the extra $500 for $738 I didn't expect. All together it was almost exactly $10,000 off of Sticker and I got the exact truck I wanted by way of a dealer trade.
 
This is good information...some of you thankfully understand it better than I could. Here's my question...

If I purchase my vehicle on December 20th and use it 50% of the time for my business until the end of the year 11 days later, does it qualify as a business-use vehicle for that year? And would I have to account for business use the next year and the following years?

(Yeah, I'm looking for a major loophole here...can ya blame me?)
 
Hmmmm. Looks like a link I can attach to the folks at the stopsuvs website.... >:D

Hehehehehe. AND, I get to drive 496 CI of earth moving power.. ;D
Durwin
 
Please be aware that you have to have a legitimate profit motive for your business. If you start a business and have no income to offset your deduction from your truck, etc. then the IRS is going to disallow your depreciation expense and you'll be stuck with a nice hefty tax bill with interest and penalties.

There is no free ride, but if you can play your cards right then you can write-off the majority of your business-use vehicle.
 
Quickag, could you tell me how this would apply to me? I have a small tropical fruit grove. The trees are too young for much production, but I will report about $3000 in sales for 2002. I have filed tax returns on the grove for the past 4 years, always at a loss. I need to buy a truck for hauling fertilizer, fruit etc.Will the unused tax writeoff for this year be carried forward to subsequent years? Does this deduction really not help me much?
 
This deduction won't help you much, but you can carry forward tax losses and if you had any gains in the past, you can carry your loss back a certain number of years by amending your return. I would hold off getting a new truck until your fruit grove really starts generating income. Then again, you can get the truck and just not 179 expense it and elect out of the 30% bonus depreciation. E-mail me at cswells@weaverandtidwell.com if you have any other questions and I'll do my best to help you!
 
Lifted from Car and Driver Today


SUV Tax Break as Much as $75,000
January 21, 2003
Page 1 of 1

President Bush's economic stimulus plan could triple the size of a little-known tax loophole that could mean from $25,000 to $75,000 in tax writeoffs for small business owners ? including doctors, lawyers and financial advisers ? when buying an SUV for business purposes, the Detroit News reported.

The idea behind the tax benefit is to help small businesses to jump-start the U.S. economy by spending more. Washington expanded the tax deduction for business equipment to $25,000 in 2003, from $17,500 in 1996. Bush's new plan takes the deduction limit up to $75,000.
"This is a plan that says that if you are willing to take risk and invest more, that there's a benefit for doing so," Bush said in unveiling the initiative January 9. "It's an incentive for small business to increase ... And it will have a positive effect throughout our entire economy."

The tax break in question was originally intended to exempt farmers and other small businesses that used pickups or cargo vans from limits that applied to luxury vehicles. But the definition was written well before the advent of upscale trucks and SUVs. Cars are not eligible for this deduction.
With vehicles in the $47,000 price range, such as the Ford Excursion, more than $30,000 of the purchase price can be deducted, reducing a small business tax bill by about $12,600. Raising the cap on business equipment to $75,000 will make it possible to write off the entire cost of vehicles such as the Hummer H2 or BMW X5 in the first year, the News said. A small-business purchase of a car, by contrast, might take 10 years to 20 years to fully depreciate.

A business owner purchasing a Hummer H1 for business purposes could write off $25,000 of the purchase price as an equipment investment, for example. Another 30 percent of the remaining purchase price, or $24,356, could also be deducted under a provision passed in Congress last year to stimulate the economy. The Hummer owner could then deduct 20 percent of the remaining purchase price, or $11,366, under regular depreciation rules. That's a total deduction of $60,722. Under the Bush plan, the total deduction for a Hummer H1 will go up to a potential $88,722.
"That would make a Hummer practically free," a dealer told the News.

 
I'm a tax accountant with one of the big four and I have to agree with everything that QUIKAG has said. The deduction can be a very powerful tool for small business owners. At the same time, however, the IRS is stepping up its examinations targeted towards small business. It is strongly suggested that anyone using these deductions follow the letter of the law or they could wind up burned. After all, if the IRS chooses to audit you, they do not have to focus on one area, but can look into anything on the return.
 
The Avalanche qualifies for the federal tax deduction on vehicles over 6,000 GVWR. ?It has just been increased to $100,000 so the entire price of the vehicle can be deducted if you qualify.

Just for chuckles, I wanted to see how cheap I can get a new Avalanche. ?I was looking for another vehicle but I wanted to keep the cost down. ?I was looking at a Camry or Impala (under $20k) but after doing the math, a new Avalanche could be less expensive (after taxes).

MSRP $32,365 2WD WBH

Delete cargo cover - $500

Invoice $28,378 + $200 dealer

Subtract $4000 (national rebate)
Subtract $500 ?(bonus Memorial Weekend Cash)

$23,878

6,000 GVWR Tax Deduction (If used for business - assume 25% tax bracket) and you are looking at
@$18,000 for a new 2003 Avalanche after taxes.

A basic Avalanche is potentially less expensive than a 4 cyl Camry!


The Chevy Sub and Tahoe also qualifies for the 6000 GVWR deduction, but both of them sell for more than the AVA.
 
A basic Avalanche is potentially less expensive than a 4 cyl Camry!
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Yeah, until you factor in the cost of fuel over its intended life ?:eek: ?You would have a more "useful" vehicle, though if you need the space. ?A much "cooler" one, too ?;)

I thought only the 2500 would qualify for the tax credit ????

EDIT: Try here if you haven't already seen this thread on the subject...may help.
 
I don't think a WBH without cargo panels weighs more than 6000lbs. My 03 Z71 is 5700+/- lbs according to the spec sheet.

Craig
 
CraigF said:
I don't think a WBH without cargo panels weighs more than 6000lbs. ?My 03 Z71 is 5700+/- lbs according to the spec sheet.

Craig
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6,000 GVWR or Gross Vehicle Weight Rating is total vehicle weight + passengers + fuel and cargo. ?Chevy's full size SUV/Trucks (Silverado, Tahoe, Suburban, Avalanche, 1500 & 2500 models)?qualify for the 6,000lb "loophole". ? You can verify this by looking at the label on the driver's door.

The 2500 by itself weighs over 6,000 (closer to 7,000) lbs and falls into the commercial category 3.5+ tons. They have a GVWR of 8500# - 7000lb vehicle + 3/4 ton (1,500# cargo).



 
z said:
6,000 GVWR or Gross Vehicle Weight Rating is total vehicle weight + passengers and cargo. ?Chevy's full size SUV/Trucks ?qualify for the 6,000 "loophole". ? You can verify this by looking at the label on the driver's door.

The 2500 actually weighs over 6,000 (closer to 7,000) lbs and falls into the commercial category 3.5+ tons.
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I didn't realize that. Thanks for the info.

So are you going to buy it? I recommend getting the cargo panels, but that's your choice, of course.

Craig
 
CraigF said:
So are you going to buy it? ?
Click to expand...


Got to check my GM Card points. ?It should knock a few thousand dollars off the price. ?Never thought of an Avalanche as an "economy" car. ?
 
RichUF, I guess we are going to have to get you that deputy badge. Thanks for the link and helping us out.

Folks please lets continue the discussion in the existing thread.

Skidd 7;)
 
Skidd said:
RichUF, I guess we are going to have to get you that deputy badge. ?Thanks for the link and helping us out.

Folks please lets continue the discussion in the existing thread.

Skidd ?7;)
Click to expand...

C'mon Skidd. Those really long threads are hard to keep up with. :D And, until you lock this one, I'm sure people will continue to post.

>:D

Craig
 
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