How Small Business Owners Can Save Money on a New Vehicle Purchase, #106
If you’re a small business owner and are potentially in the market for a new vehicle, this episode is for you! Join me as I discuss potential vehicle write-off strategies that you can only take advantage of in 2022, the logistics of writing off a vehicle for small business use, and other ways vehicles can keep your tax dollars in your pocket.
You will want to hear this episode if you are interested in...
Can I write off the purchase of a vehicle as a small business owner? [1:23]
The logistics of writing off vehicles for your small business [3:39]
Challenges to taking advantage of Section 179 and other vehicle write-off strategies [8:34]
Understanding small business vehicle write-offs
As a small business owner, you can write off business expenses such as standard supplies and various operational costs. You also have the ability to write off the purchase of equipment under what is known as Section 179 Depreciation. Cars, trucks, and SUVs all fall under Section 179 and 100 percent of the cost can be written off over the course of five years. However, vehicles with a gross vehicle weight rating (GVWR) of over 6000 pounds qualify for “bonus depreciation” and can be written off over a shorter period of time.
The interesting part about this is that there are a number of mainstream SUVs with a GVWR of over 6000 pounds. Meaning, if you are a small business owner and are already looking to purchase an SUV, Section 179 is your new best friend. You should absolutely consult the link below before making your purchase because it could save you tens of thousands of dollars come the 2022 tax season.
The deduction is in the details
So how do you write off the entire cost of a vehicle on your small business taxes? The simple answer is that 100 percent of the vehicle’s use must go towards the business. That can include any activities associated with running the business. However, plenty of small business owners have vehicles that are used for both business and personal use. Thankfully, there is still a tax write-off available in this scenario.
In order to determine how much of the vehicle’s costs can be written off, you would need to calculate how much of the vehicle’s usage is going towards the business. For example, if the vehicle is used for business 70 percent of the time, you can write off 70 percent of the total cost. This can be a great strategy if you are trying to keep yourself out of a higher tax bracket after a successful year for your business. Listen to this episode for more insight on writing off vehicle purchases as a small business owner!