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Truck and SUV Depreciation for 2013

  
  
  

describe the imageIn our last post on auto depreciation we discussed the depreciation limits for most autos and trucks weighing less than 6,000 pounds. Today let’s look at the rules for larger trucks and SUVs.

Depreciation

A truck, van, or SUV with a gross (loaded) vehicle weight rating (GVWR) over 6,000 pounds is not subject to the “luxury auto” depreciation limits. For most taxpayers, these vehicles will be considered 5-year “MACRS” property for tax depreciation, and the cost will be deductible according to this schedule: 

Depreciation chart resized 600

Section 179 expensing on SUVs

  • 5-year property is actually depreciated over 6 years because the IRS only allows partial depreciation in the first year.
  • The above percentages are based on the “half-year” convention. If your fixed asset purchases were heavier in your 4th quarter, the “mid-quarter” convention (and different percentages) might apply.
  • Depreciation is reduced by the percentage of personal use of the vehicle. Commuting is considered personal use.
  • Vehicles used less than 50% for business purposes use different depreciation methods.

The Section 179 expense deduction on SUVs is limited to $25,000. For this purpose an SUV is defined as any 4-wheel vehicle that is:

  • Primarily designed to carry passengers over public roads, and
  • Has a gross vehicle weight rating over 6,000 pounds and no more than 14,000 pounds.

An SUV does not include any vehicle that:

  • Is designed to have a seating capacity of more than nine persons behind the driver’s seat, or
  • Is equipped with a cargo area of at least six feet in interior length that is not readily accessible from the passenger compartment.

The general Section 179 limitations also apply.

Section 179 expensing on heavy trucks

For vehicles over 6,000 pounds GVWR which do not fall under the definition of SUV above, the full cost of the vehicle can be expensed under Section 179, subject to the general Section 179 limitations.

Bonus depreciation

50% bonus depreciation can be taken on SUVs and heavy trucks, subject to the general bonus depreciation rules.

Example

ABC Company, a calendar-year taxpayer, purchases a new vehicle for $45,000 and places it in service in July, 2013. The vehicle’s GVWR is over 6,000 pounds and it meets the definition of SUV. ABC has taxable income of $50,000 in 2013.

The total deduction in 2013 for the vehicle is $37,000:

  • Section 179 expense of $25,000, plus
  • Bonus depreciation of $10,000 ($45,000 - $25,000 Sec. 179 = $20,000 X 50% = $10,000)
  • Regular depreciation $2,000 (($45,000 - $25,000 Sec. 179 - $10,000 bonus = $10,000 X 20% = $2,000)

The above information covers the basic elements of cost recovery for SUVs and heavy trucks. Many considerations go into each decision to acquire business assets, and many involve non-tax factors. However, tax considerations should play a role; accelerated tax benefits may enable you to obtain the property you need earlier and at reduced after-tax costs.


Please Note:  The information contained in this blog, including comments posted by visitors, is provided for informational purposes only and should not be construed as financial advice on any subject matter. It is not intended to be a substitute for obtaining accounting, tax, or other financial advice from an appropriate professional adviser.

IRS Circular 230 Disclaimer: Any advice contained in this blog is not intended or written to be used and cannot be used for the purpose of avoiding any tax penalties that may be imposed under federal law or promoting, marketing or recommending to another party any transaction or matter addressed herein.

Comments

Is there a list of acceptable SUV's for the $25000 section 127 deduction for 2013. I have a CPA list from a from a friend and in includes a Jeep Grand Cherokee, which only weighs 4900 pounds. We are confused about this. We are trying to decide whether to go car shopping. Thanks!
Posted @ Wednesday, December 11, 2013 10:12 PM by Tammy Bosse
The IRS does not publish a list of vehicles which qualify as SUVs eligible for $25,000 of Section 179 expensing. You can generally determine if a vehicle is eligible yourself by looking up its specifications on the manufacturer's website, or on a site like Edmunds. Be sure to look for the gross (loaded) vehicle weight rating, or GVWR. Do NOT go by the base curb weight. If the GVWR is over 6,000 pounds (and no more than 14,000 pounds) and the other conditions noted above are met, the vehicle qualifies for up to $25,000 of Section 179 expensing. 
 
For example, here's a link to the Jeep web page for 2013 Grand Cherokee specs.  
http://www.jeep.com/hostc/vsmc/vehicleSpecModels.do?modelYearCode=CUJ201303 
 
The GVWR for each model is 6,500 pounds. So, if all other conditions are met, this vehicle qualifies for up to $25,000 of Section 179 expensing. Note that the base curb weights are under 4,900 pounds. The base curb weight doesn't matter for this purpose - it's based on the GVWR. 
 
I hope that answers your question, but if not, please leave another comment. Thanks!
Posted @ Thursday, December 12, 2013 12:25 PM by John Marsh
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