Can I write off my Lexus?
Yes, say FSB's experts. Here's how to do it and what to watch out for.
(FORTUNE Small Business) -- Dear FSB: I read your article on tax write-offs for luxury SUVs. I have a 2000 RX300 Lexus. Can I still write it off? And if so, how much a year?
- Deneen, New Castle, Del.
Dear Deneen: Normally, when you go to write off a vehicle for business purposes, you commit to a method in the first year that it's placed in service. "You have two choices," explains David Gorsich, EA, of San Diego. "You can go with the actual expenses method and depreciate it or use the fixed, flat mileage rate." If you pick the depreciation rate, "you're stuck with it," says Gorsich, who teaches tax law to professionals in his series of 'Brass Tax Presentations.' "But if you choose the mileage method, you're at liberty to switch off in a following year." So if you have a vehicle that you haven't yet depreciated, you still have the ability to do so.
"But now you're looking at a previously owned asset," says Gorsich, "so you have to go back to the old methods of depreciation." You must use today's value for your Lexus. "Usually when people ask about this all they can remember is that they paid $4,800 for the vehicle in the beginning and would like to score a $4,800 write off now. But it's not going to happen that way. You have to ask, 'what's the car going for today?' Considerably less. So it's probably not the fun and excitement they're hoping for."
To further reduce your fun and excitement, you must multiply your claim by the percentage you actually use the Lexus for business. "If it's only 60%," says Gorsich, "you claim 60% of the depreciation, not the entire banana."
Remember, there are weight limitations when considering deductions for SUVs, says Jeff Berdahl, CPA, President of Berdahl & Company, P.C. in Center Valley, Penn. "Look on the door jam of your car or ask your dealer to find out the gross vehicle weight loaded," he says. "If it's a truck or van or SUV on a truck chassis, with a gross weight of up to 6,000 lbs., the maximum deduction for 2007 for the first year is $3,260. For a vehicle with a gross weight of 6,000 lbs., but not over 14,000 lbs. you can write off up to $25,000 but there are some complicated limitations. It's best to consult with a tax professional."