Heavy Vehicle Tax Incentive

100% first-year bonus depreciation is allowed for heavy SUVs, pickups, and vans used over 50% for business

The Tax Cuts and Jobs Act (TCJA) allows unlimited 100% first-year bonus depreciation for qualifying new and used assets that are acquired and placed in service between 9/28/17 and 12/31/22. However, a used asset cannot have been previously used by you or your business entity; it must be new to you or the entity. Under prior law, the first-year bonus depreciation rate for 2017 was only 50%, and bonus depreciation was not allowed for used assets.

The new law's 100% first-year bonus depreciation deal can have a hugely beneficial impact on first-year depreciation deductions for new and used heavy vehicles used over 50% in your business. That's because heavy SUVs, pickups, and vans are treated for tax purposes as transportation equipment rather than passenger vehicles, and that means they qualify for 100% first-year bonus depreciation.

However, you must use a heavy vehicle over 50% for business for 100% first-year bonus depreciation to be available. Otherwise, you must depreciate the business-use percentage of the vehicle's cost over a six-year period.

Heavy vehicle definition

100% first-year bonus depreciation is only available when an SUV, pickup, or van has a manufacturer's gross vehicle weight rating (GVWR) above 6,000 pounds. Examples of suitably heavy vehicles include the Audi Q7, Audi Q8, Mercedes-Benz GLS 450, Mercedes-Benz GLE, & the Porsche Cayenne. 

You can usually verify a vehicle's GVWR by looking at the manufacturer's label, which is usually found on the inside edge of the driver's side door where the door hinges meet the frame. 

Example

In 2019, you buy a new $60,000 heavy SUV and use it 100% in your business. You can deduct the entire $60,000 in 2019 thanks to the new 100% first-year bonus depreciation break. If you only use the vehicle 60% for business, your first-year bonus depreciation deduction is $36,000 (60% x $60,000)

If you instead buy a used $45,000 heavy SUV, pickup, or van, you can still deduct the entire cost in 2019 thanks to the 100% first-year bonus depreciation break - which is allowed for both new and used vehicles. If you only use the vehicle 60% for business, your first-year bonus depreciation deduction is $27,000 (60% x $45,000).