Not right. Here's how I calculate how it breaks down:
GVWR is ~6400 lbs - Heavy SUV depreciation rules apply
For this example – Assume you use the vehicle 100% for business to make the math simpler, and assume a $100K purchase price.
- You can write off $25,000 ($25k limit on heavy SUVs) of the cost thanks to the Section 179 deduction on new equipment.
- Then, you will be able to write off another $37,500 thanks to first year bonus depreciation (.50($100,000-$25,000)).
- Then, you follow the regular business depreciation rules to depreciate the remaining cost of $37,500 over 5 years. (20% x $37,500) = $7,500. You take this amount quarterly, so if you buy in third quarter, you'd take half this amount in 2017.
So 1st first-year depreciation write-off equals ($25,000 + $37,500 + $3,750 = $66,250). Now if you are in a high tax bracket like I am this might actually save you 45% in combined Federal and state taxes, so just the depreciation savings will result in a ($66,250 * .45) = ~$30K tax savings.
Add your $7,500 Federal tax credit and your total tax savings the first year is ~$37,500.
Caveats:
You are only supposed to take depreciation based on business use of the vehicle. If you only use it 80% for business your depreciation will only be 80% of the $30K.
You should confirm this with your own CPA.
