In planning for the 2008 tax year (already!), I have a question re: purchasing a vehicle and the work-related automobile deduction.

You very nicely outlined deducting mileage vs. actual expenses on your website(http://www.mdtaxes.com/news1206.html). However, I was wondering how the actual expense calculation is changed by purchasing vs. leasing a vehicle. In my case, I will likely purchase a $30,000 vehicle with cash towards the end of 2008, and try to use it mostly for work, so that a high percentage of my miles will be work-related. If I use the car 50% of the time for work, can I deduct $15,000 for 2008? or, is it necessary to depreciate the vehicle and deduct it over several years?

Thanks!

Zip Code: 02446

When you purchase an automobile, the amount of depreciation you can claim is limited. If you pay more than $16k for the car, the maximum depreciation is $3k in year one, and $5k in year 2. You also need to multiply the maximum depreciation by the percentage of miles driven during the year that are business miles.

If you purchase your car in 2008, I have good news for you. The recent stimulus package includes "bonus depreciation" for new autos (used autos don't count), which increases the first year depreciation by $8k. As it currently stands, this is a one-year tax break.

And if you buy one of those large SUVs with a gross loaded weight in excess of 6,000 pounds, you can write off up to $25k of the purchase price in the first year.

Zip Code: 01801

That is interesting. I traveled a lot between hospitals. Do you need a business to qualify for the "bonus depreciation" ( I only have W2 income)?

Thanks.

BL

Zip Code: 14534

To qualify for the 2008 Bonus Depreciation of $8k, you need to purchase a new car during 2008, and more than half of the car's mileage must be allowable business miles. Believe it or not, I don't think used vehicles qualify for this tax break.

You'll then need to prorate the $8k of bonus depreciation based on the percentage of miles driven during the year that are business miles.

Zip Code: cpa@mdtaxes.com