Tax Guru – Ker$tetter Letter

Q:

Subject: section 179

Hi Karry
I am plnning to purchse suv over 6000ld in a few days,I undrstnd the first yr dedction in 25K,Is the balanced deducted as depretition over a 5 yr priod?It will be usd 100% for busness.
We have been leasing suvs till now,our lease just ended,so we though our best option wld be prchase under sect179.The suv costs $65000.oo
We wld very much appretaite as much info as you can provide re deduction,etc.
thank you

A:

You really need to be working directly with your own professional tax advisor if you are serious about handling your tax issues properly. A good tax advisor can show you what a rip-off leasing vehicles is so that you don’t ever repeat that expensive mistake.

S/he can also show you what kind of depreciation deductions you can expect from your proposed SUV purchase. Whatever amount of the purchase price that you don’t expense under Section 179 will be depreciated over the SUV’s five year life, including some in the first year.

Since the 179 deduction is limited by your taxable income, you may or may not be allowed to actually claim any on your 2006 tax return. In some cases, you can actually claim more deductible expense by skipping the 179 and just claiming the normal deprecation on the full cost basis. Your personal professional tax advisor will be able to give you more specific guidance on this.

Good luck.

Kerry Kerstetter