The IRS imposes strict limits on depreciation deductions for passenger vehicles used for business driving under so-called luxury auto rules.

Buy a heavy-duty sports utility vehicle for business use. As long as the vehicle meets certain requirements, you can sidestep the luxury depreciation limits.  In fact, you may be able to write off the entire business portion of the cost of the SUV this year.  Generally, a business can currently deduct the cost of qualified business property under Section 179 of the tax code. This provides a generous limit of $1 million, giving you plenty of wiggle room.  The luxury auto rules affect depreciation deductions of passenger vehicles used for business purposes.  The maximum Section 179 deduction allowed for a passenger vehicle placed in service in 2021 is $18,200.  Because this figure is based on 100% business use, it must be reduced if there is personal use.  Vehicles with a gross vehicle weight rating over 6,000 pounds are exempt from the luxury auto depreciation limits, because they’re classified as transportation equipment.  But the tax law caps the maximum Section 179 deduction for a heavy SUV placed in service this year at $27,000. The remainder of the business portion of the SUV’s cost is eligible for 100% first-year bonus depreciation.

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