Can IRS take back your heavy SUV tax deduction?

Why the 6,000-pound SUV gets so much attention

Every December, business owners hear about buying a heavy SUV for the tax deduction. The 6,000 pounds is the weight rating on the sticker inside the driver’s door, not how much the vehicle actually weighs.

Once a vehicle is rated over 6,000 pounds, IRS doesn’t cap the deduction the way it does for regular cars. That usually means you can deduct most of the cost in the first year, as long as you use it for business more than half the time.

The catch comes a few years later

Here is a hypothetical example. Say you deduct most of a $70,000 SUV in December. Two years later, you only use it for business 40% of the time.

Because business use has fallen to half or less, IRS makes you add part of that earlier deduction back to your income and pay tax on it. The big write-off on your first tax return can turn into taxable income on a later one.

What makes the deduction stick

The deduction only holds up if a few things are true:

• It is in service by December 31. Buying the SUV isn’t enough. It has to be on the road and in use for the business by year end.
• Business use stays above half. Keep using it mostly for business in the years that follow, not just the first year.
• You can prove it. A mileage log is how you show how much of the driving was for business.

Before a year-end vehicle purchase, it helps to think about how you will actually use the SUV over the next several years, not just what it does for this year’s tax return.

How we handle it

At Sansone CPA & Financial, we coordinate your tax, investment, and retirement decisions so a big year-end purchase is looked at for the years after it, not just the first tax return. That is the core of our tax and financial planning for business owners in Crystal Lake, IL.