If you use your car for work or your own business, depreciation is one of the values you can deduct from your taxes. More specifically, vehicle depreciation is the portion of your car purchase that you can deduct from your taxes, taken over a period of several years. This can make up a large part of your vehicle expense deductions for a few years after you purchase your vehicle.
However, there are some limitations.
Namely, your depreciation write-off may be restricted if your car is considered a luxury car. A luxury car is defined by the IRS as any vehicle that has four wheels, is mostly used on public roads, and weighs 6,000 pounds or less. Most sedans, minivans, and even some SUVs are therefore legally considered “luxury cars” regardless of their price tag.
How Does This Affect My Deduction?
These regulations may mean that you can only deduct a certain amount for the vehicle. Certain vehicles, like SUVs, have it even rougher because of the limits Congress has placed on how much you can deduct.
SUVs have been used as a way to get around the luxury vehicle limit in the past because they are passenger vehicles that are heavier than most other cars. However, a new limit has been placed on all SUVs with a gross weight of 14,000 pounds or less.
Not only is this double the weight limit for other vehicles, but it also means that you can only claim about $25,000 in deductions from the purchase of an SUV that fits these parameters.
What Vehicles Are Exempt From This Limitation?
With all that being said, there are exceptions to this limitation. However, these exceptions change yearly, so make sure to consult a professional before going forward with a deduction. Some examples of exempt vehicles include:
- Vehicles with seating for more than nine individuals excluding the drivers and front passenger’s seat
- Vehicles with no seating behind the driver’s seat
- Vehicles that fully enclose the driver’s seat
- Vehicles with an open cargo area of at least six feet
There are other exemptions to this limitation, as well. For a complete picture of vehicle depreciation deductions and limitations, call Taxation Solutions, Inc.! We’re here to help taxpayers in Virginia Beach with expert information, tips, and advice.