Issue link: http://palletcentral.uberflip.com/i/1301695
26 PalletCentral • September-October 2020 palletcentral.com palletcentral.com could generate greater write-offs, then depreciation allowances for vehicles you own or the amount of lease payments for vehicles you lease come into play. For passenger cars, which includes vans and light trucks (no more than 6,000 pounds), depreciation is capped if the cost of the vehicle exceeds a set dollar amount 3 . For 2020, the cap isn't triggered until the vehicle's costs exceeds about $90,000. The cost of buying a heavy SUV (over 6,000 pounds) in 2020 can essentially be fully deducted. This is due to qualifying for bonus depreciation (in addition to the special expensing limit of $50,900 in 2020). Heavy trucks – semi-truck tractors and trailers – are deducted using basic depreciation rules. A heavy truck is five-year property for purposes of depreciation, so the deduction in the first year is 20 percent of the cost. Note that due to special rules, five- year property is written off over a period of six years. If you purchase a plug-in electric drive motor vehicle – a passenger vehicle or light truck – you may qualify for a federal tax credit. A credit is more valuable than a deduction because it reduces your taxes dollar for dollar, regardless of the tax bracket you're in. The IRS has a list 4 of eligible vehicles and the amount of the credit for each. Keep in mind that once the manufacturer sells more than 200,000 vehicles, the credit phases out. Thus, no credit can be claimed for any Tesla cars purchased in 2020 and a reduced credit for GM electric-powered vehicles applies only to purchases in the first quarter of 2020; such a vehicle purchased now gets no tax credit. If, instead of buying a passenger vehicle, you lease one, you may have to reduce your deduction for lease payments by an "inclusion amount." This isn't triggered unless the fair market value of the vehicle A heavy truck is five-year property for purposes of depreciation, so the deduction in the first year is 20 percent of the cost. Note that due to special rules, five-year property is written off over a period of six years.