How Do I Get a Tax Deduction for Buying an SUV for Business?

Section 179 Deduction for SUV
Section 179 Deduction for SUV for Business. Markus Bernhard/Getty Images

You can get a tax deduction of up to $25,000 in Section 179 depreciation by purchasing and using a new vehicle for your business.  In other words, you can deduct almost the entire cost of the vehicle in the first year you use it.

Why Section 179 Deductions are Good for Your Business

Normally, depreciation is deducted as an expense to the business over the life of the equipment or vehicle. But Section 179 allows you to accelerate the depreciation, taking all of the expense of the purchase in the first year.

This is obviously a huge advantage to a business, because it reduces taxable income by the full amount of the purchase. A $25,000 vehicle would normally be expensed (taken as a business expense) over several years, but if you qualify for the Section 179 depreciation deduction, you can take the entire depreciation allowance in the first year.

Vehicle Requirements for Section 179 Deductions

Before you run out to buy a vehicle for your business, you should know about the requirements for this depreciation deduction:

  • The IRS says the vehicle must be "a 4-wheeled vehicle primarily designed or used to carry passengers over public streets, roads, or highways, that is rated at more than 6,000 pounds gross vehicle weight and not more than 14,000 pounds gross vehicle weight." [That is, basically, an SUV.]
  • The $25,000 limit does not apply to any vehicle:
    • Designed to seat more than nine persons behind the driver's seat,
    • Equipped with a cargo area (either open or enclosed by a cap) of at least six feet in interior length that is not readily accessible directly from the passenger compartment, or
    • That has an integral enclosure fully enclosing the driver compartment and load carrying device, does not have seating rearward of the driver's seat, and has no body section protruding more than 30 inches ahead of the leading edge of the windshield.

    More Requirements and Restrictions

    • The SUV must be new, not used.
    • You can't expense (deduct as a business expense) more than the cost of the vehicle.
    • You must put the vehicle "into service" (use it in your business) by December 31. If you don't use it, you can't get the deduction, so make sure you can prove the vehicle was used in your business by the end of December.
    • You can only deduct the business use of the vehicle, not personal use. So if the vehicle is used 50% for business and 50% for personal use, only 50% of the cost can be deducted.
    • You cannot deduct more than your business net income for the year. So if your net income is $20,000, you cannot use the $25,000 deduction to generate a tax loss for the year. 

    Get Help from Your Tax Professional

    You can apply for a Section 179 deduction with IRS Form 4562. But there are many limits, exclusions, and special rules for different types of businesses. You may also find benefits and drawbacks to purchase this year or the next. Discuss the possible purchase of a vehicle with your tax advisor. 

    Disclaimer: I am not a tax attorney or CPA and I am not providing tax advice. I also don't know your specific situation, which might cause this deduction not to be applicable in your business. Before you make any decisions to buy an SUV to take advantage of the Section 179 deduction, check with your tax advisor.

    Read more details in IRS Publication 946: How to Depreciate Property