I was just reading about the 'hummer loophole' and have a few questions...i'll contact my accountant but i'm anxious to figure it out....seems theres a lot of misinformation out there
Lets say the SUV I bought for my wife gets used 51% of the time for business...which it very well may. It's GVWR is 6400lbs, it is used, and i paid 15k. Can i expense the whole 15k this year? what about the tax we paid on it?
if we expense the vehicle, must we deduct actual expenses going forward? or can we use standard mileage deduction?
I'm not an accountant but I have been through the depreciation loop a few times...
For 2009 the weight threshold was 6000 pounds. So it seems like your SUV may qualify. As I understand it, for trucks that weigh between 6000 and 14000 pounds can be expensed up to $25k in the year aquired. Note that a $75k Escalade wouldn't qualify. However, as I understand it, They (The Escalade business owner) could expense $25k the first year and then depreciate the balance over the next 5 years. In the first year they may also be entitled to a 1st years depreciation deduction in addition to the $25k that is expensed.
Whether the vehicle was new or used does not matter. All that matters is that your business aquired the vehicle for business use.
The taxes you paid and any other fees are all part of the total price of the truck that you then expense/depreciate. If you traded in a partially depreciated or expensed car/truck then there are rules to subtract from your total price the remaining basis ( e.g. depreciated value (ot the trade) less what you received for it).
Yes, it is my understanding that you could depreciate proportionally what you paid. So if the business uses 51% and you paid a total price of $15k (including taxes and fees) then you could expense your ($15k)x((51%) = $7650.
Regarding your deduction of actual expenses. You will need some sort of mileage record showing business/personal use. But no there will not be a cents per mile deduction. Any other expenses like gasoline/maintenance/repairs/insurance will all be (proportionally) deductable.
When you sell the vehicle if it's worth more than zero (for an expensed truck) or what you have depreciated it down to (in normal depreciation mode). The excess money you get over it's basis is then taxable income.
My personal take is that yes, the rules are a little tricky but allow you to get a better deduction than doing the cents per mile route.
hope that helps
