Will a last-minute vehicle purchase save you on taxes?
Your business has seen success this year – Yeah! That’s awesome. In fact, you may be considering buying a business vehicle as you make expansion plans for next year. Or, you only need an additional tax deduction for this year. To get the tax deduction, you’ll need to a) own the new vehicle & b) place it in business service by midnight on December, 31. There’s a tax rule that requires that your new vehicle “be placed in service and driven at least 1 mile” before the start of the next tax year.
What types of vehicles can give last-minute tax savings?
Assuming you have placed the vehicle in service before December 31, the following vehicles can provide you significant deductions for last-minute tax savings:
- A new or used pickup truck, cargo vans, and passenger vans with gross vehicle weight rating (GVWR) greater than 6000 pounds. This vehicle must escape the SUV classification.
- New SUVs, crossover vehicles, and mini-type vans
- New cars and other passenger vehicles that are less than 6000 pounds.
Factors to consider before you make the purchase
There are some factors to consider when deciding on a vehicle for business and tax saving purposes. Nothing is simple and straight-forward unless you know the tax code. Therefore, before you make the purchase, we want to look at these factors with you:
- Is it the right time in my business to make the purchase?
- How much do you get in last-minute tax savings? Some vehicles get depreciation and expensing; other vehicles get expenses and bonus depreciation.
- How will your vehicle purchase affect your business in the following tax year?
Even though it may be tempting to simply go out and make the vehicle purchase, we urge our clients to contact us first. Paragon Accounting & Tax Solutions wants to be your first call when you’re making a decision that could affect your tax obligations. We want to help you make sound decisions that will give you most in tax savings.
Our year-end tax prep meetings help you with tax saving strategies.
Our year-end tax prep meetings are underway. We sit down with you and review your business numbers for the year so we can best anticipate your tax obligations. We help you determine if it’s in your BEST interest to do something before the tax year has ended. Schedule a meeting so we can give you custom advice for your small business.