I still remember the first time I filed taxes for my business. In addition to having no idea what a write-off really was, I also didn't worry too much about guessing on the numbers. A few government audits later, I discovered what it really meant to do things the right way. Over the years, I have met lots of business owners that weren't too worried about fudging the numbers, and nearly all of them have run into problems. Proper accounting is important, which is why I created this website dedicated to business accounting. I know that if you learn the right way to do things and focus on integrity, your business can avoid a world of problems.
A contractor's cargo van can take a beating over the years and will have to be replaced at some point in time. If you are a contractor who utilizes a large cargo van that is showing its age and needs to be replaced, you should do it before the end of the year to qualify for a couple of nice tax deductions from the IRS. Here is an overview of what the tax deductions are and how you can apply for them during the 2016 tax filing season.
The IRS provisions for deducting a large cargo van can be found in Section 179 of the tax code. Section 179 will allow you to immediately deduct up to $25,000 of the cost of the vehicle and also claim the 50% depreciation deduction for new vehicles put into service before the end of 2016. There are some exceptions to the rule and the type of vehicle you can purchase to qualify for the deductions.
Types of Qualifying Vehicles
The vehicle has to weigh between 6,000 and 14,000 pounds, and it has to be used primarily for your business. In the past, business owners would buy SUVs like Hummers and then deduct those expenses under Section 179, but that has changed. Now, the vehicle can carry passengers, but the primary purpose of the vehicle will be to move at least nine commercial passengers between places like a hotel and an airport or train station. Anything less than a nine passenger commercial vehicle (like a hummer) no longer qualifies for the deductions under normal circumstances.
A non-passenger commercial vehicle must have at least six feet of cargo space behind the driver's seat and the cargo space must not be easily accessible from the passenger seat. For instance, a cargo van that has a wall between the driving area and the cargo area. If you are a contractor who uses an extended cab pickup truck that has a four-foot bed to carry supplies to a work site, buying a new one with a four-foot bed will not qualify you for the deduction because of the bed size.
How to File
The IRS requires that you file form 4562. This form is called "Depreciation and Amortization." You can deduct other business expenses as well using this form. The IRS system can be complicated and you should consult your tax advisor to learn more about how you can deduct your new cargo vehicle to make sure you can get all the tax deductions you and your business can qualify for before the end of the year.Share
23 November 2016