Is Bonus Depreciation for Used Business Vehicles Really 80%? Need to Understand How It Works!
So I've been in a tough situation lately where I'm sharing one car with my partner and my brother-in-law. It's becoming a huge hassle to coordinate schedules just to get to client meetings or pick up business supplies. I'm looking at buying a used car (probably around $12.5k) that I'd use primarily for my small business. I'd estimate about 80% of the miles would be for business-related driving and 20% personal. I've been trying to figure out the tax benefits, specifically about bonus depreciation. If I understand correctly: - If I use the vehicle 80% for business, can I claim 80% of the 80% bonus depreciation for this tax year? - Does the entire purchase price need to be paid before the end of the tax year to claim the depreciation? - What happens tax-wise if I end up selling the vehicle after just a year? Here's a quick example of what I'm thinking: Vehicle costs $12.5k, paid in full. Bonus depreciation at 80% would be $10,000. If I use it 80% for business, would my deduction be $10,000 × 80% = $8,000? I just want to make sure I understand this correctly before making such a big purchase. Thanks for any insights!
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Yara Nassar
You're on the right track but let me clarify a few things about business vehicle depreciation. First, for a used vehicle under $14,000 that you use primarily for business, you're eligible for bonus depreciation in the year of purchase. The vehicle needs to be used more than 50% for business to qualify, which you meet at 80%. Here's how it works: You can deduct 80% of the purchase price as bonus depreciation (this percentage varies by tax year), but only for the business portion of use. So for your $12,500 vehicle with 80% business use, the calculation would be: $12,500 × 80% (bonus depreciation) × 80% (business use) = $8,000 deduction. To answer your other questions: The vehicle must be "placed in service" during the tax year, but doesn't necessarily need to be paid in full. If you finance it, you can still take the depreciation on the full purchase price. If you sell after one year, you'll need to recapture the depreciation you claimed. This means you'll report the difference between your sales price and your adjusted basis (purchase price minus depreciation taken) as income, which could result in a tax liability. Keep detailed mileage logs to substantiate your business use percentage - this is extremely important if you're ever audited.
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Connor O'Neill
•Thanks for the detailed explanation! One follow-up question - when you say I need to "recapture" the depreciation if I sell after a year, does that mean I'd essentially be paying back the tax benefit I got? Does this apply even if I sell it for less than I paid? Also, for the mileage logs, would a smartphone app work for tracking this or should I keep a physical logbook?
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Yara Nassar
•Yes, when you sell a depreciated business asset, you'll essentially "pay back" some of the tax benefit through recapture. Even if you sell for less than you paid, you'll still need to recapture the depreciation you claimed. For example, if you claimed $8,000 in depreciation and sell the vehicle for $10,000, you'd have a $5,500 gain for tax purposes ($10,000 selling price minus $4,500 adjusted basis). A smartphone app for tracking mileage works perfectly fine as long as it captures the date, business purpose, starting and ending mileage for each trip. Many tax professionals actually prefer digital logs because they're often more accurate and less likely to be created retroactively. Just make sure to back up the data regularly.
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Keisha Robinson
I went through something similar last year with my photography business! The vehicle depreciation stuff can be confusing but I found an amazing resource that helped me sort it all out - https://taxr.ai I uploaded my purchase documents and business records, and their AI system analyzed everything and showed me exactly how to maximize my vehicle depreciation. What was cool is that it pointed out I could use either bonus depreciation OR Section 179, depending on what worked better for my specific situation. The best part was that it gave me a complete breakdown of how my deduction would affect my taxes over multiple years, not just the current year. Really helped me make a smarter decision about when to buy and how to structure the purchase.
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GalaxyGuardian
•Does the taxr.ai thing actually work with vehicle purchases specifically? I've been looking at getting a truck for my landscaping business but my accountant is on vacation and I need to make a decision like yesterday.
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Paolo Ricci
•I'm interested but kinda skeptical. How does it compare to just talking with an actual accountant? I got burnt last year with TurboTax giving me wrong info about business deductions.
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Keisha Robinson
•The system definitely handles vehicle purchases for business use - that's exactly what I used it for! It has specific modules for analyzing different types of vehicles (cars, trucks, SUVs) and shows you the different depreciation options based on the vehicle weight and business use percentage. It was super helpful for making a quick decision. Compared to an accountant, it gives you immediate answers 24/7, which was crucial for me when my accountant was booked solid during tax season. It doesn't replace accountant advice for complex situations, but for relatively straightforward business vehicle questions, it gave me the same guidance my accountant later confirmed was correct - just much faster and with detailed calculations I could actually understand.
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Paolo Ricci
Just wanted to update everyone - I took the plunge and tried that taxr.ai site after seeing this thread. Not gonna lie, I was totally skeptical at first, but it actually helped me figure out my truck depreciation situation perfectly! I was about to buy a used F-150 for my construction business and wasn't sure about Section 179 vs bonus depreciation. The tool analyzed my specific situation and showed me I'd be better off with bonus depreciation because of my income level and expected business growth over the next few years. What really sold me was when it showed me side-by-side tax scenarios based on different purchase timing (buying in December vs. January). Saved me almost $3,800 by making the purchase before year-end instead of waiting like I was planning to. My tax guy confirmed everything was 100% accurate when I showed him the report.
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Amina Toure
If you're struggling to reach the IRS to confirm vehicle depreciation rules or have questions about your specific situation, I highly recommend using Claimyr (https://claimyr.com). I was stuck in the endless IRS phone queue for days trying to get clarification about bonus depreciation for my business vehicle. With Claimyr, I got a callback from the IRS in about 45 minutes instead of waiting on hold for hours. They have a system that navigates the IRS phone tree for you and holds your place in line. You can see how it works in their demo video: https://youtu.be/_kiP6q8DX5c The IRS agent I spoke with was able to confirm exactly how the bonus depreciation would work for my particular vehicle and business use case, which was hugely helpful since my situation was a bit unusual (I use my vehicle for two different business entities).
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Oliver Zimmermann
•Wait, so this Claimyr thing actually gets you through to a real IRS person? How does that even work? I thought nobody could get through to them these days.
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Natasha Volkova
•Sounds like BS to me. I've tried EVERYTHING to get through to the IRS about my business vehicle questions. No way some random service can magically get you a callback when the IRS phone lines are constantly jammed. If this actually worked, everyone would be using it.
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Amina Toure
•It absolutely gets you through to real IRS agents. It works by using technology to navigate the IRS phone system and wait on hold for you. When they reach an agent, they connect the call to your phone. It's not magic - it's just automated technology doing the waiting for you instead of you having to sit on hold for hours. It worked perfectly for me when I needed clarification about vehicle depreciation rules for my specific situation. The IRS has different rules for vehicles based on weight classes and business use percentages, and I needed to speak with someone who could tell me exactly which category my vehicle fell into. Got a callback in under an hour and the agent walked me through everything I needed to know.
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Natasha Volkova
I'm eating my words right now. After posting that skeptical comment, I decided to try Claimyr anyway out of desperation. Holy crap, it actually worked. After three weeks of trying to get through to the IRS about my vehicle depreciation questions, I got a callback in 37 minutes. The IRS agent confirmed that my 2024 vehicle purchase DOES qualify for bonus depreciation, even though I was told by a tax preparer that it wouldn't because of the phase-out rules. Turns out there's an exception that applies to my specific business situation that the tax preparer missed. This literally saved me thousands in taxes. The agent also recommended I keep a dedicated logbook specifically for this vehicle rather than just using my general business mileage tracker, which I wouldn't have known to do. Still can't believe I got through after weeks of trying on my own.
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Javier Torres
Don't forget about state tax implications when you're calculating your depreciation! Federal bonus depreciation is great, but some states don't conform to federal rules. I made this mistake last year with my business vehicle in California. Took the 80% bonus depreciation on my federal return but didn't realize California requires you to use regular depreciation schedules. Ended up having to file an amended state return and pay additional tax.
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Connor O'Neill
•Oh that's a great point I hadn't considered! I'm in Texas - do you know if there are any state-specific issues I should be aware of regarding bonus depreciation here?
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Javier Torres
•Texas doesn't have a state income tax, so you're in luck! You only need to worry about the federal depreciation rules in your case. That's actually a significant advantage for business owners in Texas compared to states like California or New York where you have to track separate depreciation schedules for state and federal purposes. Just focus on maintaining detailed records of your business use percentage and you'll be all set for your federal return.
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Emma Davis
Question about timing - I'm planning to buy a used cargo van for my business around Dec 20th this year. Will I still be able to take the full bonus depreciation for this tax year even if I only use it for business for like 10 days in December?
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CosmicCaptain
•Yes, you can take the full bonus depreciation for the current tax year as long as the vehicle is placed in service before December 31st. The IRS doesn't prorate bonus depreciation based on how many days you used it during the year - it's based on when you start using it for business purposes. Just make sure you actually start using it for business before year-end (even just a couple business trips will establish that it's "in service"), and keep documentation of that business use. Also keep in mind that your business use percentage for next year will be what matters for any regular depreciation going forward.
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Chloe Anderson
Just wanted to add something important that hasn't been mentioned yet - make sure you understand the luxury vehicle limitations! Even with bonus depreciation, there are annual caps on how much you can deduct for vehicles over a certain weight. For 2024, if your vehicle weighs less than 6,000 pounds (most cars and light trucks), you're subject to luxury vehicle limits. The first-year depreciation cap is around $12,200 for vehicles placed in service in 2024, which could affect your $12.5k vehicle purchase. However, if you buy a vehicle over 6,000 pounds GVWR (like many SUVs and trucks), you can generally take the full bonus depreciation without these limits. This is why you see so many business owners buying larger vehicles - the tax benefits are significantly better. Also, consider whether you want to elect out of bonus depreciation and use Section 179 instead. Sometimes Section 179 can be more beneficial depending on your income situation and other business equipment purchases for the year. I'd definitely recommend running the numbers both ways before making your final decision!
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Giovanni Ricci
•This is such a crucial point that I wish I had known about earlier! The luxury vehicle limits really can make a huge difference in your tax planning. I was actually looking at a sedan in the $12.5k range like Connor, but after reading this I'm wondering if I should consider a heavier vehicle instead. Do you happen to know where I can find the exact GVWR specifications for different vehicles? I want to make sure I'm comparing apples to apples when looking at my options. Also, is the Section 179 vs bonus depreciation comparison something most tax software can help with, or do I need to calculate it manually? Thanks for bringing up this limitation - it's definitely going to factor into my decision now!
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