Tax deductions

Tax deductions for the purchase of a new vehicle

Buying a new car for business purposes can offer significant tax advantages. In some cases, consulting a tax professional may reveal opportunities to immediately deduct up to 100% of the purchase price of qualifying vehicles. However, there can be some important quirks to be aware of with car tax deductions.

First, it’s important to note that the following information should not be considered tax advice and business owners should contact a CPA for the latest details on changes to tax laws. Second, your vehicle’s depreciation limits for the first year may depend on the type of vehicle you purchased new in the applicable tax year.

According to a bulletin sent to GM dealers, the deductions in question relate to Section 179 of the Internal Revenue Code for vehicles with a “GVWR greater than 6,000 pounds and put into service in 2021.” GVWR stands for Gross Vehicle Weight Rating, which can offer a big advantage when choosing an SUV over a passenger car.

For example, Buick says models like the Encore GX and Envision may qualify for a total tax deduction of up to $18,200. In the case of the larger Enclave SUV, the company says up to 100% of the purchase price may be deductible, with no per-vehicle or overall limitation on popular luxury models for 2021.

For GMC, the full deduction limit of $18,200 is available on the Canyon pickup and Terrain crossover. Other GMC models such as the Sierra 1500, Yukon and many others offer the possibility of deducting up to 100% of the purchase price. We’ve also seen similar documentation from BMW, promoting potential tax savings at this time on cars.

Incentives for new cars are down in the industry, and more automakers have paid customers to wait. With so many changes and relief programs rolling out during the coronavirus pandemic, now might be a good time to start thinking about what deductions to claim from a tax professional.

Cheapest luxury car and SUV rental deals