Tax season is the time of year when clients invariably try to take as many deductions as possible--within the extent of the law. One area commonly overlooked, especially for self-employed individuals, is the allowable deductions for a car.
Brushing up on the rules will benefit your client (and perhaps you, too!).
Naturally, if a car is used primarily for business, the IRS allows taxpayers to deduct a maximum $3,060 each year. But now that cars cost more, and more of us yearn for a luxury car--even a gigantic SUV--how does the car depreciate over time?
Slowly, for sure. For example, if a car costs $60,000 and the deduction is $3,060, do the math: almost 20 years later, the car is fully depreciated--but who keeps a car 20 years?
Another avenue to suggest or pursue is buying that large SUV that weighs 6,000 pounds or more. The IRS classifies such autos in the "truck" category, and doesn't impose the $3,060 maximum deduction as its does for regular vehicles.
Therefore, taxpayers can deduct 20 percent of the cost each year. If the SUV costs $35,000, that's a full $7,000, or more than twice as much as the regular deduction.