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Automobile Expenses
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Vehicle purchase and deduction

My accountant tells me I can deduct up to 25K on the purchase of a new vehicle (SUV). Can you please validated?


Zip Code: 19355

Re: Vehicle purchase and deduction

Generally, the amount you can claim as first year depreciation expense for a vehicle you purchase is limited to $3,000 or so. There is an exception for vehicles with a Gross Loaded Weight in excess of 6000 pounds, however. When you purchase one of these large SUVs you can claim a first year deduction of up to $25k.

There is one catch. If you get rid of the SUV, or stop using it for business purposes, before 5 years have elapsed, you'll need to "recapture" some of the depreciation you claimed, and pay back some of the taxes you saved on the $25k deduction you took this year.

So while this is a great tax break, you need to ask yourself if you really want to drive around in one of these huge vehicles for the next five years.

I would also keep an eye on whether Congress gets rid of this tax break. They just instituted the $4500 clunker rule, where they are giving people money through November 1st for trading in their low gas mileage vehicles.

Zip Code: 01801

Re: Vehicle purchase and deduction

Keep in mind that you must document your business mileage and total mileage to determine what percentage of your use is deductible. Also keep in mind that if your business use falls below 50%, you cannot make the Expensing Election (Section 179) that would get you to the $25,000 deduction.

Zip Code: 43085

Re: Vehicle purchase and deduction

I have owned my SUV for over 5 years, and it is now time to get an updated vehicle. Is it better to trade in the SUV, or sell the old SUV and get a new SUV separately? The new SUV will also be over 6000 lbs.


Zip Code: 92009

Re: Vehicle purchase and deduction

For most business vehicles, you are generally better off selling the vehicle than trading it in. That's because the depreciation you can claim on most cars is limited, so by selling the car, you end up taking a loss on your business tax return. In other words, the value of the car decreases quicker than the depreciation you are allowed to claim.

If you trade in your vehicle, you will add the undepreciated portion of your car to the amount you paid for the new car, which will leave you with an over-inflated cost basis for your new car.

For an SUV with a gross vehicle weight in excess of 6,000 pounds, however, you are allowed to claim more depreciation up front. For that reason, you might not be in too bad of shape if you trade-in that SUV for a new one after holding the SUV for at least 5 years. You just need to compare the undepreciated basis in the SUV with its current fair value.

Zip Code: 01801