900 N. Kings Highway, Cherry Hill, New Jersey 08034
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Fax: 856.667.3652
The Online Advisor - March 2000
Read this before you buy your next business car
Are you aware that there are limitations on the tax deduction allowed for business use of "luxury cars"?
The definition of a luxury car may surprise you. It doesn't depend on manufacturer or model, or even on price; it depends on weight.
For cars (with certain exceptions, such as hearses and taxis), annual depreciation expense is limited for any vehicle with an unloaded gross weight of less than 6,000 pounds. That means that virtually every passenger car manufactured today is subject to the limits. If you buy a business vehicle in 2000 and it meets the "luxury car" definition, first-year depreciation will be limited to $3,060.
An important exception to these rules exists for certain trucks, vans, and sport utility vehicles. The same "luxury car" limit applies if the loaded gross vehicle weight of any of these vehicles is less than 6,000 pounds, but if the manufacturer's specified gross vehicle weight, including load, is more than 6,000 pounds, these vehicles escape the depreciation limitation.
As a result, if you buy for your business a truck, van, or sport utility vehicle with a loaded gross weight over 6,000 pounds, your first-year deduction won't be limited by the luxury car rules. Your vehicle may also qualify for the Section 179 deduction of up to $20,000 in 2000. But if you buy a passenger car instead, your first-year deduction will be much lower.
There are many additional tax factors that should be considered, so call us before you buy a business car.