The tax cut-off is near and it just may be that you don’t have enough in tax deductions to offset how much money you’ve made. There are new tax deduction rates as per the IRS in 2022 and this might also be an opportunity to buy something for your business that helps with the onset. If you’re looking to truly maximize deductions, you could buy a car for personal or business use. The IRS lets you deduct local and state sales tax or local and state income tax. You can’t do both but you can decide which one will best maximize deductions. If you use a vehicle for business, charity, medical or moving expenses, you can deduct costs relating to it. The IRS lays it out quite clearly as to who can use a vehicle as a tax deduction.
Do You Need a New Vehicle?
The first question is whether you need a new vehicle or not. If the car you have at the moment is older, perhaps a bit unreliable, or just isn’t suitable for your lifestyle, you can solve the problem of getting more deductions and getting a replacement vehicle. The deadline for this is December 31, 2021, so if you’re thinking this situation suits your needs, you should start shopping around.
To make sure you’re compliant with the “placed in service” rule, you’ll need to drive the car for at least one business mile before the deadline of December 31, 2021. You’ll want to own and drive the vehicle to ensure it qualifies as a deduction. You can put this on your small business end of tax year list but make it a priority as time is running out.
Purchase a New or Used SUV, Crossover Vehicle, or Van
If you or your corporation purchases and puts a new vehicle into service before December 31, 2021, you get quite a few benefits. This includes purchases on a used SUV or crossover vehicle that the manufacturer classifies as a truck with a gross vehicle weight rating (GVWR) of 6,001 pounds or more.
Benefits include:
1. You can elect bonus depreciation of 100 percent
2. You can select Section 179 expensing of up to $26,200
3. MACRS depreciation using the five-year table
4. No luxury limits on vehicle depreciation deductions
If you buy and place your “truck” into service before the cutoff date and the vehicle was %50,000, you can claim 90% of business use. The business cost is $45,000 and you can deduct this amount on your tax form for 2021. If you have made a lot of money, this is a very smart tax move for your business.
Purchase a New or Used Pickup
Image by Tordinator from Pixabay
If you or your corporation purchase and used a new or used pickup truck for service prior to December 31, 2021, there are some benefits including:
1. Bonus depreciation of up to 100 percent
2. Section 179 expensing of up to $1,050,000
3. MACRS depreciation using the five-year table
4. No luxury limits on vehicle depreciation deductions
The pickup truck has to have a GVWR of more than 6,000 pounds with a cargo area (the truck bed). This bed has to have at least six feet of length that aren’t considered a passenger compartment. If the pickup is a short bed but passes the 6,000-pound-GVWR test, it’s considered an SUV. This isn’t the end of the world as there’s still eligibility within the $26,200 SUC expensing limit with a 100 percent bonus depreciation.
Depending on your business needs, you can purchase a new or used vehicle and use it as a deduction. This can reduce the amount of taxes you need to pay while
