TL;DR: buying a more expensive and nicer vehicle may allow you to write off more on your taxes, as long as you meet a few requirements. You really can get a tax deduction on your car if you (1) have a legitimate business need for it, and (2) your car qualifies under the tax rules.
In case you didn’t realize, used car prices are stupid high right now. While this seems like a negative if you’re a buyer, it also presents an opportunity to offload a vehicle you’re not excited about for one you’d really enjoy.
As a rule, constantly switching out cars is one of the absolute dumbest things you can do financially. If you have a note on your car, this post isn’t for you. Deal with your debt first. This post is for folks who can afford financial creativity.
For the rest of you, pay attention. This type of tip is exactly what this blog is about: finding loopholes that not only save or earn you money but improve your quality of life right now.
The Tax Rule: Section 179
The spirit of Section 179: if you buy a vehicle for work, you can write it off as a tax-deductible expense. This is like any other piece of work equipment (like a computer, office equipment, etc.).
Practically, what this means is anything that’s obviously and solely a work vehicle can get a write-off. Think ambulances, work vans, specialty trucks, etc. These aren’t ambiguous because you’re not buying a painter’s van to pull up to the party and flex on your former high school classmates.
The more interesting part is when you buy a more-normal looking vehicle like an SUV. You can still use this as a deduction, but there are limitations:
- At least 50% of its usage needs to be for work and not personal
- Gross weight over 6,000 pounds
- Seating capacity of 9 or fewer (so big SUVs are okay, school bus does not count)
- Some minor things that shouldn’t matter, like it costs less than $1,000,000
Not only do you write off mileage as a tax loss, but you can amortize the vehicle depreciation itself as an expense over the years on your taxes.
Vehicles that Qualify for Tax Deductions
- Audi Q7
- BMW X5, X6
- Buick Enclave
- Cadillac XT5, XT6, Escalade
- Chevrolet Silverado, Suburban, Tahoe, Traverse
- Chrysler Pacifica
- Dodge Durango, Grand Caravan
- Ford Expedition, Explorer, F-150 and larger
- GMC Acadia, Sierra, Yukon
- Honda Pilot 4WD, Odyssey
- Infiniti QX80, QX56
- Jeep Grand Cherokee
- Land Rover Range Rover, Discovery
- Lexus GX460, LX570
- Lincoln MKT AWD, Navigator
- Mercedes-Benz G550, GLS, GLE, Metris, Sprinter
- Nissan Armada, NV 1500, NVP 3500, Titan
- Porsche Cayenne
- Tesla Model X
- Toyota 4Runner, Landcruiser, Sequoia, Tundra
Unless you already have a specific vehicle in mind, you probably glossed over that list. If that’s you, I’ll highlight a few for you.
This is what most of these options are. If you’re in a city-city like NYC or Miami, you’ll probably go with one of these.
G-Wagons are the common choice for a luxury SUV over 6,000 lbs for the specific reason that you can write if off with your business.
Got $100,000 to burn? Sure. Get a Tesla X.
If you’re a contractor, painter, mover, or anything else interesting, a truck is the best dual-use vehicle you’ll own. It’s the right mix between actually useful and still has clout—depending on your city’s culture.
Are you really doing business in one of these? I guess if you’re just using it for work travel, but I mean…
No shade, no shade. Some of my best friends drive mini-vans. Well, just one friend actually. But no shade.
This is Ideal For Frequent Work Travelers
If you’re a traveling salesman using your own car, you should already be writing off your miles even if you own a vehicle under 6,000 lbs. But if you’re using your own car, you might as well get a sweet vehicle and get a tax deduction on your car, too.
If you’re a painter or contractor and you could make use of a pickup, odds are you probably already know about this deduction. If not, consider getting something sexy like a King Ranch and not just a standard white utility van (if you can afford it). Make your vehicle something you can be proud of (and if it means you only have to have one and not manage two a car and a van at the same time, all the better.
Get a Tax Deduction on Your Car, but Creatively
If you’re living in the city or you’re trying to flex on your fellow suburbanites, then sure, get a Tesla X or a G-Wagon.
If you have loads of kids and a Honda Odyssey is more your speed, great. Just make sure you’re also using it for business purposes.
But let’s get creative. Say you want to be a hipster and live out of a van (at least for a weekend a month). Is your van’s gross weight over 6,000 pounds? Sweet, get it and rent it out for 90% of the month. You get every other weekend like a negligent divorced parent, and you’re making money on it. You’ve turned a depreciating asset into an income-generating (and tax deducted) asset.
This isn’t the same as living out of a camper van. That’s a great way to save money, but you probably can’t employ this tax strategy since you won’t be using it for business (unless you travel for work and this is your primary vehicle). I’m talking about renting it out as a recreational vehicle.
You can live out of your van if your job is, for example, a travel photographer. You’re using your vehicle as a business tool, so it could still qualify. But for real, talk to someone legally qualified to advise you on this. That’s not me.
Get a Tax Deduction on Your Car, but Legally
This ain’t legal, accounting, or investment advice, obviously. This is a blog. If you’re actually going to do this, definitely talk to someone legally qualified to make sure you’re getting everything you can out of being smart about your taxes.
Have fun. Buy something you can afford and don’t pay any more taxes than you need to.