How You Can Deduct That New Car -- up to 100 Percent! -- on Your 2017 Tax Returns
As part of the new “Tax Cuts and Jobs Act," many entrepreneurs may not realize how much more they can deduct for 2017 new car purchases on their tax returns, due April 17, 2018.
While most of the new Trump tax plan changes went into effect this past January 1, there may actually be three deductions business owners can take for new car purchases on their 2017 tax returns.
So, if you bought a new vehicle in 2017, here are those potential automobile deductions to review with your tax advisor:
SUV and truck purchases made in 2017. If you bought a full-size SUV (over 6,000 pounds) or truck in the last three months of 2017, up to 100 percent of the car’s purchase price can be written off on your 2017 tax return. Even if you only put down a deposit, you may be able to deduct up to the full purchase price, especially if you have a home office.
Here’s how this new SUV/truck bonus depreciation deduction works for purchases after September 27, 2017: The amount you can deduct depends on how much you use the car for business. For example, if you bought an SUV for $60,000, and use it 90 percent of the time for business, you can deduct $54,000.
Passenger car purchases made in 2017. If you bought a passenger car in the last three months of 2017, up to $11,160 of the purchase price may be deducted for 2017. This first-year depreciation amount increases to $18,000 for cars purchased after 2017. Of course, the amount you can deduct is reduced for personal use of the car. For example, if you bought a passenger car for $50,000 and used it 90 percent for business in 2017, you can deduct $10,044 ($11,160 x 90 percent) on your 2017 tax return.
Vehicle registration and sales tax fees tied to purchases made in 2017. If you bought a car by the end of 2017, you may also be able to deduct vehicle registration fees, if you paid them by December 31, 2017. And, to the extent that the vehicle is used for business, the sales tax on the purchase may be deducted.
Another thing that entrepreneurs should know is that a home office can create more business-car deductions. A home office can increase the percentage the car is used for business, and can make most of a business owner’s automobile expenses deductible.
According to IRS rules, your first drive of the day and the last drive home is called a commute and is not deductible. And, if you have a home office, your first "commute" may be 30 feet inside your home. But your next commute -- say, to a client's business -- is considered business mileage. Many people almost double their automobile deduction by having a home office
The home office is one of the most overlooked deductions by small business owners and entrepreneurs because their accountant is afraid it may raise a “red flag.” If your accountant tells you not to take a home office deduction, you need a new tax advisor.
With all the tax changes being implemented, it’s especially important to find a great tax advisor, who can literally save you millions over your lifetime. This new car deduction is just one piece of good news for entrepreneurs in the new Trump tax plan. Be sure to make the most of it.