The IRS has released new depreciation dollar limits for passenger business vehicles and light trucks and vans placed in service in 2015. (IRS Revenue Procedure 2015-19) It also modified the limits for 2014.
Alert: Due to the reinstatement of bonus depreciation by the Tax Increase Prevention Act (TIPA), business owners can add $8,000 to the first-year limits initially established for 2014. For instance, the first-year limit for a passenger vehicle under TIPA is $11,160 (up from $3,160).
As things stand now, there’s no bonus depreciation for 2015, unless Congress extends it to cover new (not used) vehicles placed in service this calendar year.
There are two separate categories of business vehicles for this purpose: (1) passenger vehicles and (2) light trucks and vans. Generally, both categories are subject to the “luxury car” rules limiting deductions to a specific amount.
Tax loophole: A vehicle with a gross vehicle weight rating (GVWR) over 6,000 pounds is exempt from the luxury auto depreciation limitations if it is used over 50% for business. Many heavy-duty SUVs used by business drivers meet the GVWR requirements. In this case, you’re entitled to a first-year write-off of up to $25,000 for a vehicle placed in service in 2015—almost eight times the usual limit!
See the chart for the luxury auto limits on vehicles placed in service in 2015. Note that these figures are based on 100% business use. In the real world, you probably use your business vehicle for personal driving at least some of the time. For example, if you acquire a light truck vehicle this year and you use it 90% for business purposes, the first-year deduction is limited to $3,114 (90% of $3,460).
Tip: For business vehicles that are leased, the luxury car rules are reflected in “lease inclusion” tables posted on the IRS website.