Tax Guru-Ker$tetter Letter
Thursday, December 19, 2002
The Wall Street Journal has a good piece today on how much more lucrative the tax deductions are for business vehicles that weigh over 6,000 pounds. I have been advising on this tax break since it was first enacted by our rulers in 1984 and am always amazed when I hear of a tax pro who is unaware of it. In fact, after each of my seminars on tax tips for Realtors, I would receive several inquiries from other tax pros asking me when special rules were enacted for vehicles over 6,000 pounds, assuming they were brand new.
What's also been surprising is how little the car companies are doing to publicize the extra tax benefits of buying one of their heavier vehicles. I can still remember receiving a letter from American Motors in 1984 comparing the lucrative tax breaks (including the now defunct investment tax credit) from buying one of their Jeep Grand Wagoneers that weighed 6,100 pounds instead of a lighter weight vehicle from another manufacturer. Over the years, many of the formerly heavy vehicles, such as the Grand Wagoneer, have gone on diets and no longer qualify for the special rules. However, there are still plenty of other SUVs and trucks that do have gross vehicle weights over 6,000 pounds. As I have always advised, it's not a good idea to buy a heavy vehicle just for the tax breaks. However, if you are debating between a vehicle that weighs over 6,000 pounds and one that doesn't, the additional tax deductions may be the deciding point.
This is also a good opportunity to remind of how using a C corporation instead of an S can double the Section 179 expensing deduction. An individual could buy a big SUV for his personally owned business and deduct $24,000 of the cost in the first year. His C corp could also buy a heavy vehicle and claim its own $24,000 deduction. The combined deduction of $48,000 is double what would be available with an S corp, where all limits pass through to the shareholders.