Here is a vehicle story that you will find of interest – and our accounting services near me can uncover even more tax savings you didn’t know about.
I.R.S. Audit Issue: S.U.V. Built on Car Chassis
Taxpayer D.J. is in an I.R.S. audit of his 2018 tax return. It is now at the I.R.S. appeals level.
The vehicle in question is an S.U.V. with a curb weight of 5,700 pounds and a gross vehicle weight of 6,100 pounds.
- If the tax code makes the S.U.V. a passenger vehicle, the curb weight of 5,700 pounds limits D.J.’s tax deduction to $18,000.
- If the tax code makes the S.U.V. a truck using the gross weight of 6,100 pounds, D.J.’s deduction is $55,000.
The I.R.S. lawyer handling the appeal tells D.J. that he must use curb weight because his S.U.V. is built on a car chassis.
Wrong. D.J. wins his $55,000 deduction. Here is why:
The S.U.V. must escape the luxury vehicle depreciation limits on deductions to qualify for bonus depreciation (or Section 179 expensing).
The escape works like this:
- The S.U.V. must have a gross vehicle weight rating (GVWR) of 6,001 pounds or more.
- Also, the S.U.V. must be a truck under the Department of Transportation (D.O.T.) regulations. (Using guidelines set out in D.O.T. regulations, manufacturers label S.U.V.s as “trucks” or “cars.”)
Under the D.O.T. rules, an S.U.V. can qualify as a truck regardless of chassis.
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