Q-1:

Subject: Toyota Highlander Hybrid sec 179?

 

Hi.  I found your explanation of the sec 179 deduction for schedule C  filers very helpful.

Question:  The Toyota Highlander Hybrid Limited 4WD lists a GVWR of exactly 6,000 lbs.  How would that be treated for Sec 179 purposes?

Thank you so much. 

A-1:

You are correct in pointing out the fact that a vehicle weighing exactly 6,000 pounds is subject to the luxury car rules and very minuscule depreciation and Section 179 deductions because the exemption is spelled out as vehicles weighing more than 6,000 pounds.

If the more generous depreciating and Section 179 deductions are important to you (obviously), what many people do is to have the dealer install an optional piece of equipment onto the vehicle that will add at least a few pounds to the manufacturer’s listed weight of the standard option-free model.  I have actually heard of auto dealers offering things they call “Tax Savings Options Package” that are intended to take a vehicle with a starting weight of around 5,000 or 5,500 pounds and increase it to over the magical 6,000 pound threshold.  These usually contain such weighty options as towing packages and luggage racks. 

With your desired vehicle starting at 6,000 pounds even, any option that becomes a permanent part of the vehicle should be enough to put you over the qualifying weight.

Good luck.  I hope this helps.

Kerry Kerstetter

Q-2:

Thank you so much.  Your answer is extremely helpful. 

 

I have one last question on this topic.  The IRS seems to use GVWR as the standard by which vehicle “weight” is measured, but I read  somewhere that if it is a passenger vehicle, the “curb weight” is the weight that has to be over 6,000 lbs.  If this is correct, that would present a problem with the Highlander, which has a curb weight of  about 4850 lbs.  It would be hard to imagine having enough options to push it over 6,000 lbs.  curb weight.   However, I am hopeful that this was misinformation as I have been unable to find any reference to the distinction between curb weight and GVWR in the IRS publications.  Every reference I have found uses  GVWR. 

 

Is there any reason to worry about curb weight in a vehicle that is a “unibody” style SUV (not built on a truck frame) or is GVWR the  critical weight to keep above 6,000 lbs  for all vehicles?

 

Again,  thank you.  What an awesome site!

A-2:

I did address this issue in a recent blog post. 

Since SUVs are generally considered to be in the passenger auto category, they would have to use the lower unloaded curb weight.

Good luck.

Kerry

Follow-up:

THANK YOU!!!!  I went to the link and read it.  Not what I wanted to hear but sooooo very helpful.

Q:

Subject: section 179…..Truck has less than 6 foot cargo bed

Thanks for your expertise!!

 

I am thinking of buying a 2008 Toyoto Tundra for my business.  Over 6,000 gross weight but the cargo bed is less than 6 feet long…..can I still take section 179 on the full purchase price of $40,000???

 

Thanks

A:

Checking the Tundra website, you are obviously looking at the CrewMax model, because that is the only one with an inside bed length of less than 72 inches.

Unfortunately, that vehicle does appear to fall under the SUV limit of a maximum of $25,000 Section 179 deduction, with the rest of the purchase price being depreciated over its class life of five years.

If you are truly desperate for maximum first year deductions, you should work with your personal professional tax advisor to see if it would be worth your while to take some more creative and aggressive steps, such as splitting the purchase between two entities, such as a C corp and a Schedule C business, where each could then claim up to $25,000 per SUV. 

Good luck.  I hope this helps.

Kerry Kerstetter

Follow-Up:

thanks for the help Kerry!!  I was afraid I was right on the limitation due to less than 6 foot bed..  I “assume ” the worst case is IF I took the full 40k 179 deduction in 2007 and got audited…..would still get the $25k deduction but be required to depreciate the remaining 15k over 3-5 years..plus penalty and interest of course:(

 

thanks again….will consider the 2 entity concept.

My reply:

You really need to be working directly with your very own professional tax advisor because thinking like that (claiming Section 179 for the full $40,000 and praying for no IRS audit) is ridiculously reckless and can get you into serious trouble.  Any good creative tax pro will be able to save you hundreds of times more than his/her fee in taxes, as well as keep you out of trouble with the IRS.

Good luck.

Kerry