Tax Guru – Ker$tetter Letter

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Section 179 for Used SUV

Posted by taxguru on March 5, 2008

Q-1:

Subject: pre-owned SUV and Section 179 tax code

Hello Kerry,

 

Thanks for posting a great forum on accounting. I have read so many of your articles and find it very clear. I guess it mine time to ask a question

Correct me if I’m wrong, but my understanding about Section 179 tax code is that we need to buy brand new SUV (6000 plus lb) to qualify for the $25K dedication plus the 20 % depreciation deductions for the first year

We are planning on buying pre-owned SUV (6000 plus lb) i.e. between 2005 – 2007 year model and will be using primarily for business purpose. Will we be able to depreciate 100% of the value of the pre-owned SUV i.e. in 3 to 5 yrs? Ad whether it will also qualify for the $25K dedication

Thanks

 
A-1:

You really should be discussing this kind of thing with your own professional tax advisor who can assist you better than I possibly could.

I have actually covered this point on several occasions in my blog and on my Section 179 web page.

The Section 179 deduction has never required that the asset be absolutely brand new. It just has to be new to you and not acquired from a related party.

First year bonus deprecation, which was just recently set at 50%, has always only been available for the very first owner of a business asset.

Good luck.  I hope this clears this up for you. Your own personal professional tax advisor can give you much more specific guidance on how these will affect your unique tax situation.

Kerry Kerstetter

Q-2:

thanks Kerry for your response to my question. If I understand you correct. The first year bonus deprecation only applies to brand new purchase of the SUV and not pre-owned SUV, but I should be able to  deduct 100% deprecation of the value
 
thanks

A-2:

Your personal professional tax advisor will be able to assist you in claiming the proper amount of Section 179 and normal depreciation on the SUV, taking into account the various limiting factors, such as your net earned taxable income and the percentage of business usage.

You said that it will be used “primarily” for business; which means that you won’t be able to claim the cost of the personal usage percentage.

Again, a good professional tax advisor will help you work out the proper business mileage percentage, which can be much higher if you have an home office.

Good luck.

Kerry Kerstetter

  

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