Under the Small Business Jobs Act of 2010, commercial buyers may be able to write off the full purchase price of a new truck or van put into service before December 31. Trucks with a gross vehicle weight greater than 6,000 pounds and a bed length of six feet or more qualify for a first-year deduction of the full purchase price. SUVs and trucks that weigh more than 6,000 pounds and have a bed length of less than 6 feet qualify for a first-year deduction of up to $25,000. If the purchase price is more than $25,000, a 20% depreciation can be taken on the remaining balance.
Trucks, vans and SUVs that weigh less than 6,000 pounds, like the Transit Connect, qualify for a maximum first-year deduction of $11,600. To qualify for the full amount, the vehicle must be used for business 100% of the time, but vehicles that share time for business and personal use are still eligible for a smaller deduction.
“All you need is one day on the road to get the deduction, but time is running out,” Melkonian said. “Our Massachusetts customers need to consider dealer prep of vehicles, loan processing and the time it takes to get a new vehicle registered when deciding to purchase a new commercial vehicle. With all of the holiday bank and government closings coming up, it’s not a good idea to wait until the last minute if you want this tax deduction.”
Only new vehicles qualify for the tax break, which qualifies as a Section 179 deduction. Under Section 179, qualifying businesses can write off deductions up to $2,000,000 in total property value, as long as that deduction doesn’t turn net annual income from a gain to a loss. Though the maximum deductions for commercial vehicles are only a fraction of the property deduction, they still represent significant savings in tough economic times.
For Boston Ford customers who visit Melkonian’s showroom, the tax deduction makes it possible to own a new Transit Connect for less than $12,000, assuming the value of the deduction is applied to the purchase price of Ford’s versatile, business-focused van. Designed to allow easy customization for a variety of business uses, the Transit Connect offers a small size ideal for the crowded streets of Greater Boston and a bottom-line-friendly 21 mpg city and 26 mpg highway from its four-cylinder engine.
Ford has also released a minivan version of the Transit Connect, offering seating for five, carpeted floors and four rear windows with privacy glass. Designed to appeal to families on a budget, the Transit Connect Premium skips amenities such as built-in coolers and DVD entertainment systems, but does offer plenty of cargo space behind the rear seats.
“Any time a business can get a break on taxes, it’s worth a very close look,” Melkonian said. “For companies or individuals that have seen growth in the last few months, this deduction offers a good way to offset the extra income.”