Are you considering getting a new car in 2011? There are some incentives available if you purchase a car weighing more than 6,000 pounds.
If you purchase a large vehicle, you can deduct the 100% of the car's cost in the first year, minus personal use.
According to Tax.com, "The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 increased the additional first-year bonus depreciation deduction from 50 to 100 percent of the cost of qualified property acquired and placed in service after September 8, 2010 and before January 1, 2012. The bonus depreciation deduction is allowed for both regular tax and alternative minimum tax purposes. The basis of the vehicle is adjusted to reflect the additional first-year depreciation deduction."
If you are business owner, you still have a choice between purchasing and leasing. It is certainly worth exploring for tax purposes.
Auto deductions are a large deduction when it comes to taxes for businesses. What is deductible? Expenses are only deductable for the percentage of time the vehicle is used for business. This is an IRS audit trigger and it is imperative to keep good records. Tolls and parking fees are deductible as miscellaneous expenses.
Other points to consider when purchasing a new car:
- How many miles do you drive a year? If you are leasing a car, you need to be careful of not going over the limit.
- How many miles are you driving for business comparative to personal use? Personal use is not deductable and can eat at the miles and drive the value into the ground.
- How long to plan on keeping the vehicle?
- Does carrying a debt on the vehicle bother you? Remember debt isn't recommended, but it is especially discouraged on a declining asset.
- Who will handle the service? You need to consider that cost?
- Do you have a down payment?
Answering these questions can lead you in the right direction when it comes to leasing or buying a car for your business. Personally, I rarely recommend leasing a vehicle. As I view the cost of the lease less attractive than the expense of owning.
If you would like to discuss your situation more precisely, please don't hesitate to contact your local Liberty Income Tax professional.