Deduction Limits
for Business Use Automobiles
Depreciation Write-Offs for Autos, Vans and SUV's
Depreciation deductions for business use of automobiles
are limited under the tax rules . If you place a four-wheel passenger
vehicle in service for use in a trade or business in 2004, the regular
depreciation allowance in the first year is limited to $2,960, or can be
up to $10,610 if the taxpayer takes advantage of the maximum bonus
depreciation allowance of 50 percent.
If you purchase and place in service a light truck or a van, the
limitation increases to $3,260, or up to $10,910 if you take advantage of
the maximum bonus depreciation allowance of 50 percent. The light
truck and van limits apply also to minivans and to SUV's that are built on
a light truck chassis.
The deduction limits are a bit higher if you purchase a large SUV for use
in your trade or business. Typically, an SUV has a loaded gross vehicle
weight rating in excess of 6,000 pounds.
Several of the more popular SUVs such as the Chevrolet Suburban, Toyota
Land Cruiser, Ford Excursion, etc. are heavy enough to be rated for gross
vehicle weight in excess of 6,000 pounds. These vehicles are eligible for
the higher depreciation deductions, including the section 179. What this
means is that if you purchase an over-6,000 pound SUV for $60,000 and use
it 100% in your business, you can essentially deduct the entire cost.
Other rules for claiming the section 179 deduction also apply.
Keep in mind that Congress is considering legislation that would limit the
first-year write-off for these vehicles over 6,000 pounds to just $25,000.
It is uncertain when that legislation is expected to pass, so just keep in
mind that this door may be partially closed in the near future.
