Tax Savings for Cadillac
TAX PLANNING IDEAS TO CONSIDER WHEN BUYING A CADILLAC VEHICLE FOR YOUR BUSINESS
There are some very large tax savings you could receive by purchasing a qualifying Cadillac for your business use. Here is some general information about the program, however you should always consult your tax advisor for your individual situation.
Thanks to the depreciation deductions provided by the Tax Cuts and Job Act of 2017, if a vehicle is going to be used for business in 2024, there are significant tax advantages to consider. In general, for trucks and heavy SUVs purchased after September 27, 2017 and used 100% for business, taxpayers get a depreciation deduction in the initial year that the new Cadillac is in service. There is also bonus depreciation is set to decrease by year, 60% for 2024, 40% for 2025 and 20% for 2026. In years 2027 and later, bonus depreciation is eliminated.
ADVANTAGES OF BUYING A NEW CADILLAC SUV
Congress has also kept a generous “section 179” expensing allowance resulting in significant tax deductions for taxpayers who have taxable income, bought a truck or heavy SUV in 2024 and used it 100% for business. Taxpayers that purchased heavy SUVs, such as a Cadillac XT5, XT6 or Escalade receive a “section 179” deduction up to $30,500 in the initial year. The rules that limit the amount of annual depreciation that can be deducted on passenger automobiles do not apply to heavy SUVs because they are considered to be trucks. The definition of heavy is a Gross Vehicle Weight Rating (GVWR) of 6,000 pounds or more. The lineup has four models with a GVWR of 6,000 pounds or more, with the XT5, XT6, Escalade and Escalade ESV all qualifying.
For example, if you purchase a Cadillac SUV in 2024 for $80,000 and plan to use it 100% for business, here is an example of how you can depreciate it. Since it’s a heavy SUV (over 6,000 pounds GVWR) and 100% of its use is for your company business, you can take the limited Section 179 deduction of $30,500 on your 2024 tax return. Additionally, you can claim a first-year bonus depreciation deduction on the remaining cost of $49,500 ($80,000 minus $30,500). For 2024, that’s 60% of the figure, or $29,700 (60% of $49,500). Your total write-off for the SUV is $60,200 ($30,500 plus $29,700). Don’t forget these figures and this example are solely for explanatory purposes, you need to consult your tax advisor or accountant for how these figures calculate for your individual tax situation.
CAN I USE SECTION 179 IF I BUY A USED OR CERTIFIED PRE-OWNED CADILLAC?
Please note, generally, the “section 179” expense and bonus depreciation can be utilized on new or used qualified Cadillac vehicles. The addition of used Cadillac vehicles potentially being eligible for bonus depreciation was added under the Tax Cuts and Jobs Act of 2017. There may be different limits of depreciation applied to used vehicles.
CADILLAC USED AND CERTIFIED PREOWNED INVENTORY
CONSULTANT YOUR TAX ADVISOR
It is important to remember that the Tax Cuts and Jobs Act of 2017 eliminated the taxpayer favorable treatment of like-kind exchanges under Code Sec. 1031 that was previously allowed. Taxpayers will now have a gain or loss on the traded-in auto, which will be dependent upon the trade-in value and remaining basis of the vehicle. The newly purchased vehicles depreciable cost will simply be its original net cost.
Individual tax situations may vary. The information presented was accurate at time of publishing. Federal rules and tax guidelines are subject to change. Consult your tax advisor for complete details on rules applicable to your business.