Purchasing a vehicle for business provides you with the rare opportunity to make somewhat of a difference on your business taxes. Unlike most purchases that you can claim the cost directly, vehicles cannot be claimed within the year of purchase as they still have a high residual value. As each year goes on, the value of the vehicle is less and the lost value of the vehicle are known as depreciation. It is important to know that you cannot claim depreciation if you utilize the standard mileage rate. Typically, this method takes the number of miles that one drives in a year for business and multiplies it for a number preset by the IRS. For 2017, it is $0.535 per mile
There are several requirements that you must make to claim your vehicle with either the Section 179 or the Modified Accelerated Cost Recovery System (MACRS). The primary for both is that you utilize your vehicle for more than fifty percent of business. The Section 179 deduction must have the vehicle purchased that year of claiming. The MACRS system requires that you did not utilize the standard mileage rate the first year a deduction was claimed.
The straight-line method is one that is utilized if you utilize your vehicle for less than fifty percent of the time. Utilizing this method, you look up 150% MACRS value of the vehicle and multiply it by the percentage of time that you utilize the vehicle. Then it is required that you look up the current years straight-line percentage chart. That number is multiplied the result of your previous calculation. This is the number that you can claim at the end of the year for depreciation.
For more information on how Len Stoler Dodge Chrysler, Jeep & RAM can help you with their BusinessLink, contact them for more benefits beyond the tax benefits.