If you need a new car for business, now is a great time to buy one. New models are out, very attractive dealer-financing is available, and new tax write-offs can make a deal even sweeter.
The purchase price of the cars can be depreciated over the five-year recovery fixed by law. But cars weighing no more than 6,000 pounds are subject to dollar limits on annual deductions for depreciation. But increased bonus depreciation of 50% created by the Jobs and Growth Tax Relief Reconciliation Act of 2003 means that the dollar limit on a car purchased today and used exclusively for business is $10,710. (If the car is used partly for business, the dollar limit must be allocated, so that a car used only 80% for business has a first-year limit of $8,568 [$10,710 x 80%]).
Light trucks and vans, which the tax law defines as vehicles that would not be purchased but for their business use, have a slightly higher first-year dollar limit: currently $11,010.
Cars, trucks, and vans weighing more than 6,000 pounds have no dollar limits on write-offs. In fact, their cost can be fully expensed in the year of purchase up to $100,000. Ask your car dealer whether a vehicle you are considering is heavy enough to be free of dollar limits (more than two dozen SUVs are now in this category). Note: There is currently a measure in Congress that would limit expensing for vehicles to $25,000.
BARBARA WELTMAN is an attorney and a trusted professional advocate for small businesses and entrepreneurs. She is the author with such titles as J.K. Lasser’s Small Business Taxes and Smooth Failing, and she contributes regularly to American Express OPEN and SBA.gov. Her articles have appeared in the Wall Street Journal and U.S. News and World Report. Weltman is also the publisher of Idea of the Day and monthly e-newsletter Big Ideas for Small Business at www.barbaraweltman.com and hosts radio shows and podcasts, including Build Your Business radio. She has been named one of the 100 Small Business Influencers in the U.S. for the third year in a row. @barbaraweltman