The 2009 Stimulus bill (PL 111-5) extended enhanced Small Business Expensing under Sec. 179 of the tax code through the 2009 tax year (ending Dec. 31, 2009). The package doubled the amount businesses could immediately, or in the first year, write-off their taxes for capitol investment in 2009 from $125,000 to $250,000 for purchases of new, qualifying equipment of up to $800,000 (increased from $500,000).
The law also includes an accelerated Bonus Depreciation provision. For 2009, companies could also write-off an additional 50 percent of new investment expenditures for items subject, under current law, to depreciation over 20 year or less. The remaining value of the investments would be depreciated over the life of the item.
In addition, the depreciation limitation on the amount of certain passenger automobiles (Sec.280F) is increased from $2,690 to $10,690 in the first year.
Here are the general guidelines for using the Section 179 Deduction for vehicle purchases:
What Vehicles Qualify?
Vehicles used in your business qualify - but certain passenger vehicles have a $25,000 limitation, while other vehicles that by their nature are not likely to be used more than a minimal amount for personal purposes qualify for full Section 179 deduction:
There is a limit you can deduct for example #1 above – SUV’s (as well as other passenger vehicles not listed above). The limit for the deduction is $25,000. However, you can take a normal depreciation deduction for the rest. So if you buy a $50,000 Hummer, you can deduct $25,000, and then take normal depreciation (20%) on the remaining $25,000.
What Vehicles Qualify?
Vehicles used in your business qualify - but certain passenger vehicles have a $25,000 limitation, while other vehicles that by their nature are not likely to be used more than a minimal amount for personal purposes qualify for full Section 179 deduction:
1. SUV’s and any 4-wheeled vehicle designed or used to carry passengers over public roads with a Gross Vehicle Weight (GVW) of more than 6,000 lbs and not more than 14,000 lbs (see below limits for these)
2. Heavy “non-SUV” vehicles with a cargo area at least six feet in interior length (this area must not be easily accessible from the passenger area.) To give an example, many pickups with full-sized cargo beds will qualify (although some "extended cab" pickups may have beds that are too small to qualify.)
3. Vehicles that can seat nine-plus passengers behind the driver's seat (i.e.: Hotel / Airport shuttle vans, etc.)
4. Vehicles with: (1) a fully-enclosed driver's compartment / cargo area, (2) no seating at all behind the driver's seat, and (3) no body section protruding more than 30 inches ahead of the leading edge of the windshield. In other words, a classic cargo van.
The above can be new or used (“new to you” is the key.) They can also be leased, financed, or bought outright. The vehicle in question must also be used for business at least 50% of the time.
Heavy SUV’s get a reduced deduction
The above can be new or used (“new to you” is the key.) They can also be leased, financed, or bought outright. The vehicle in question must also be used for business at least 50% of the time.
Heavy SUV’s get a reduced deduction
There is a limit you can deduct for example #1 above – SUV’s (as well as other passenger vehicles not listed above). The limit for the deduction is $25,000. However, you can take a normal depreciation deduction for the rest. So if you buy a $50,000 Hummer, you can deduct $25,000, and then take normal depreciation (20%) on the remaining $25,000.
Examples 2-4 qualify for the normal Section 179 Deduction limits.Special Tax Break Available for New Car
Purchases This Year IR-2009-30, March 30, 2009
WASHINGTON — The Internal Revenue Service announced today that taxpayers who buy a new passenger vehicle this year may be entitled to deduct state and local sales and excise taxes paid on the purchase on their 2009 tax returns next year.“For those thinking about buying a new car this year, this deduction may give them a little more drive to make their purchase this year,” said IRS Commissioner Doug Shulman. “This deduction enables taxpayers to buy now and get cash back later on their tax returns.”The deduction is limited to the state and local sales and excise taxes paid on up to $49,500 of the purchase price of a qualified new car, light truck, motor home or motorcycle.The amount of the deduction is phased out for taxpayers whose modified adjusted gross income is between $125,000 and $135,000 for individual filers and between $250,000 and $260,000 for joint filers.IRS also alerted taxpayers that the vehicle must be purchased after Feb. 16, 2009, and before Jan. 1, 2010, to qualify for the deduction.The special deduction is available regardless of whether a taxpayer itemizes deductions on their return. The IRS reminded taxpayers the deduction may not be taken on 2008 tax returns.
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