If you are in need of a new business vehicle and you are looking to reduce your 2022 business tax liabilities, it’s not too late to take action. You should purchase your business vehicle and put it into service before December 31, 2022. Don’t procrastinate because it can offer a significant tax deduction.
It is important to understand how this distinction works from a tax qualification perspective. To ensure compliance with the “placed in service” tax rule, you must drive the vehicle at least one mile on or before the end of the calendar year. You will need to both own and drive the vehicle (even if just for a mile) to ensure it qualifies for the maximum tax deduction.
Here are the business vehicle tax deduction details to understand:
You or your corporation are buying and placing a new or used SUV or crossover vehicle into service. A crossover vehicle is one that the manufacturer classifies as a truck and has a gross vehicle weight rating (GVWR) of at least 6,001 pounds. This newly purchased vehicle provides four potential tax benefits:
You or your corporation are buying and placing a qualifying pickup truck into service. This newly purchased vehicle provides the same four benefits listed above. However, the Section 179 expensing maximum is much higher. You can claim up to $1,050,000 of the purchase price, as long as your pickup truck meets the following criteria:
If the pickup meets the GWVR requirement, but has a shorter bed length, don’t worry. It simply classifies as an SUV, which still qualifies for all the same tax deductions as listed in the first section above. The major difference is the $27,000 maximum on Section 179 expensing.
New business vehicles that meet federal or state clean vehicle standards may be eligible for additional tax deductions.
For more year-end tax planning advice and to maximize your business vehicle tax deductions for 2022 and beyond, contact Illumination Wealth today.