IRS guidance provides the 2024 depreciation limits for “luxury” business vehicles. For vehicles placed in service in 2024, depreciation limits (including first-year bonus depreciation) are $20,400 for year one, $19,800 for year two, $11,900 for year three, and $7,160 for each year after that. This includes passenger cars and SUVs, trucks, and vans if their gross vehicle weight (GVW) is 6,000 pounds or less. The IRS also announced lease inclusion amounts for lessees of passenger vehicles first leased in 2024. Read Rev. Proc. 2024-13 on irs.gov for more details (PDF).
Purchasing a heavier vehicle can offer tax advantages. New or used vehicles may be eligible for Sec. 179 expensing, which might allow you to deduct the entire cost. However, a reduced Sec. 179 limit ($30,500 for 2024) applies to vehicles (typically SUVs) with GVWs of over 6,000 pounds but no more than 14,000 pounds.
Also, remember that if a vehicle is used for business and personal purposes, depreciation must be allocated between deductible business use and nondeductible personal use. The depreciation limit is reduced if the business uses less than 100%. If business use is 50% or less, you can’t claim any bonus depreciation or Sec. 179 expensing.
Please call our office whenever you have questions or need expert tax advice.