Need Some Deductions for 2011?

Don't overlook these!

Updated for 2011

Small Business Deductions: Car and Truck Expenses

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100% Business Use of Vehicle

If you use you vehicle 100% for business use, you may deduct all of your out-of-pocket operating expenses for that vehicle plus depreciation.

EXAMPLE

100% business use:

You're self-employed
You operate a sole proprietorship
You used your car 100% for business
Your annual operating expenses for your vehicle were $4,000
You paid $500 interest on your car loan
The registration fee was $250
Annual depreciation was $800

You can deduct:

Out-of-pocket expenses of $4,750 plus
Depreciation of $800.
Tax Forms:
- If your business is a sole proprietorship:
  - Deduct your out-of-pocket expenses on Schedule C, line 9.
  - Deduct depreciation on Schedule C, line 13
- Use Form 4562 to report depreciation.

Depreciation limits:

There are annual depreciation limits for passenger cars ($3,060 for 2011) and light trucks, vans, and SUVs weight-rated 6,000 pounds or less ($3,260 for 2011).

Bonus Depreciation for 2011 for Passenger Cars, Light Trucks, Vans, and SUVs 6,000 Pounds or Less

For 2011, you may claim an additional $8,000 for first-year bonus depreciation for a new vehicle placed in service for business use during 2011.

For a new passenger car placed in service in 2011, you may claim the regular annual depreciation limit of $3,060 plus $8,000 bonus depreciation for a total deduction of $11,060.
For a new light truck, van, or SUV weight-rated 6,000 pounds or less, you may claim the regular annual depreciation limit of $3,260 plus $8,000 bonus depreciation for a total deduction of $11,260.

Bonus depreciation only applies to new vehicles placed in service during 2011. However, you may claim the Section 179 deduction (first-year expensing deduction) for new or used business property placed in service during the year.

Personal and Business Use

Keep in mind, the annual depreciation ceilings in the tables assume 100% business use. Consequently, if you used your vehicle for both business and personal use, you may only claim the business-use portion of the annual ceiling.

For example, if you used your passenger car 80% for business purposes and 20% for personal use, and your vehicle was new when you placed it in service in 2011, you may claim 80% x $11,060 or $8,848. If your passenger vehicle was used, you may claim 80% x $3,060 or $2,448.

Section 179 Deduction (referred to as first-year expensing)

If you take the Section 179 deduction, the annual depreciation limits still apply.

If you use your vehicle for both business and personal use, you must reduce the annul limits for personal use. For example, if you use your vehicle 80% for business and 20% for personal use, you may only deduct 80% of the annual limit.

You may claim a Section 179 deduction for new or used depreciable business property only if the property was purchased and placed in service in the same year. In other words, if you purchased depreciable business property in 2010 and placed the property in service in 2011, you may not claim the Section 179 deduction.

Heavy Trucks, Vans, and SUVs Gross Weight Over 6,000 Pounds but Not More than 14,000 Pounds

There are no annual depreciation limits for heavy trucks, vans, and SUVs. These are vehicles with a gross weight over 6,000 pounds but not more than 14,000 pounds. For 2011. the annual Section 179 limit for these vehicles is limited to $25,000 rather than the general expensing limit of $500,000. The vehicle must be use more than 50% for business to qualify for the Section 179 deduction.

If first-year expensing is or or cannot be elected, a full depreciation deduction using the MACRS rate is allowed with no dollar limit.

Bonus depreciation for New Heavy Trucks and SUVs Weight-Rated Over 6,000 Pounds:

If you bought a new SUV or truck, weight-rated over 6,000 pounds, and placed it in service during 2011 and used it 100% for business during 2011, you may claim 100% bonus deprecation, which allows a full deduction.

Car Expenses: Business and Personal Use of Vehicle

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