Year-End Tax Planning: Smart Strategies for Business Vehicle Purchases

As 2024 draws to a close, many business owners are seeking effective strategies to lower their tax liabilities. If you’re among those who could use more deductions this year and are considering a new business vehicle, there’s good news. You can address both needs before December 31, 2024, with careful planning. Here’s how to leverage tax deductions through strategic vehicle purchases.

Why Timing Matters

To qualify for significant tax deductions, you must ensure that your new vehicle is “placed in service” by December 31, 2024. This means you should take ownership and drive at least one business mile before the year ends. Procrastination could result in lost opportunities, so acting promptly is essential.

Purchasing an SUV, Crossover or Van

If you or your corporation buys a new or used SUV, crossover vehicle or van classified as a truck with a gross vehicle weight rating (GVWR) of 6,001 pounds or more, you stand to gain four major tax benefits:

1. 60% bonus depreciation
2. Section 179 expensing of up to $30,500
3. MACRS depreciation using the five-year table
4. Avoidance of luxury limits on depreciation deductions

Let’s say you purchase a heavy duty SUV for $100,000 and use it 90% for business purposes. Your potential write-off includes:

• $30,500 under Section 179 expensing
• $35,700 in bonus depreciation
• $4,760 from MACRS depreciation (or $1,190 if the mid-quarter convention applies)

In total, you could deduct up to $70,960 on a $90,000 business-use basis.

Purchasing a Pickup Truck

Pickup trucks also offer compelling tax advantages. If your corporation buys and places in service a qualifying new or used pickup by December 31, 2024, you can benefit from:

1. 60% bonus depreciation
2. Up to $1,220,000 in Section 179 expensing
3. Five-year MACRS depreciation
4. No luxury vehicle depreciation limits

To qualify for full Section 179 expensing, the truck must have a GVWR over 6,000 pounds and a cargo area at least six feet long that’s not easily accessible from the cabin. For example, you can buy a $55,000 pickup and use it 91% for business. This will allow you to write off $50,050 under Section 179 expensing.

Short-bed Trucks: If the truck meets the GVWR requirement but has a shorter bed, it’s treated as an SUV for tax purposes. You may still be eligible for significant deductions up to $30,500 with 60% bonus depreciation.

Considering an Electric Vehicle

Electric and plug-in hybrid vehicles can qualify you for a tax credit of up to $7,500, which is taken first and followed by standard vehicle deduction rules.

By making a well-timed vehicle purchase, you can secure substantial 2024 tax deductions and equip your business with a new asset. Don’t delay—act now to maximize your benefits before the year ends.

For help with all your business planning and tax planning needs for the end of 2024 and beginning of 2025, contact Illumination Wealth today to schedule an introductory consultation with one of our wealth management advisors.