You may already know that you can generally deduct the cost of vehicles used in your business over time as depreciation. Unfortunately if your vehicle is considered a luxury vehicle then your annual depreciation deduction is limited. The luxury auto limits could apply to a passenger vehicle costing as little as $3,160. Therefore the luxury auto limits are likely to affect your deduction for any vehicle that is rated at 6,000 pounds gross (loaded) vehicle weight or less.
Under the American Taxpayer Relief Act of 2012 new assets generally acquired and placed in service during 2013 are eligible for additional bonus depreciation equal to 50% of the asset’s cost. For your business vehicles this “bonus” depreciation wouldn’t be very useful if subject to the traditional luxury auto limits. Normally you would be limited to $3,160 as your first year deduction. However the tax act increased the luxury auto limit for 2013. If you qualify for bonus depreciation you could take a deduction on passenger vehicles up to $11,160, depending on the cost of the vehicle.
Please contact me if I can help your business by reviewing your vehicle depreciation policies to ensure you are getting the maximum tax deduction available.