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Maximizing Tax Deductions with Heavy Work Vehicles Over 6,000 lbs



It's a common misconception that purchasing luxury vehicles or heavy work vehicles over 6,000 lbs, like the often-mentioned G-Wagon, is a straightforward way to save on taxes. For 2024, the IRS offers a 60% Bonus Depreciation for such vehicles, a decrease from the 100% available between 2018-2022 and the 80% in 2023. Legislation may change this retroactively for 2023, but the principle remains.


This "luxury vehicle deduction" strategy, as it's been popularized, requires understanding the specifics. Bonus Depreciation allows accelerated deductions, potentially useful for offsetting high income years. However, the vehicle must be used at least 50% for business, and deductions are limited to the business-use portion.


A common question is about vehicle branding for deductions. Despite advertisements, the IRS only allows deductions for the cost of the advertisement itself, not the vehicle's operational expenses. Similarly, influencers cannot deduct a vehicle simply because it appears in content unless it's used predominantly for business.


Selling the vehicle introduces "depreciation recapture," requiring tax payment on previously deducted depreciation. The IRS scrutinizes such deductions closely, and audits have disallowed deductions when vehicles were not titled to the business or used primarily for business purposes.


Advice to our clients remains consistent: prioritize business need over tax savings when considering such purchases. And remember, leasing or deducting mileage are viable alternatives, with their own rules and limitations.


Before making a decision, consider the vehicle's role in your business and consult with a tax professional to navigate these complex deductions effectively.


Our team at Verity CPA is here to help. Contact us at 808.546.5026 ext. 303 or via email at info@verity.cpa for expert guidance tailored to your unique needs.

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