This sub-$20,000 luxury car is the smartest buy this tax season
Summary
As tax season returns, individuals face the familiar challenge of organizing paperwork and navigating forms, all while anticipating a potential refund from Uncle Sam to ease the burden. The publication highlights the mixed emotions surrounding this annual financial ritual.
Key Insights
Can individuals claim Section 179 deductions on personal vehicle purchases?
Section 179 deductions are primarily available to businesses, not individuals making personal purchases. To qualify, a vehicle must be used for business purposes at least 50% of the time. However, individuals may benefit from a new deduction effective 2025-2028 that allows up to $10,000 annually in deductions for interest paid on car loans used to purchase qualified vehicles for personal use, though this phases out for taxpayers with modified adjusted gross income over $100,000 ($200,000 for joint filers).
What is the difference between Section 179 deductions and bonus depreciation for vehicle purchases?
Section 179 allows businesses to deduct up to $2,500,000 in qualifying equipment and vehicles in the year of purchase, with a separate $31,300-$32,000 cap for heavy SUVs. Bonus depreciation, restored to 100% for 2026, allows businesses to deduct a percentage of the vehicle's purchase price with no annual cap on SUVs. Both can be combined: a business using 100% bonus depreciation on a qualifying heavy SUV could potentially write off the entire purchase price in year one, whereas Section 179 alone is limited to the SUV cap.