If you use a truck or van in your business — for deliveries or other functions — you may be able to write off all of its purchase price in the year you start using it for business, or you may be limited to writing off only a few thousand dollars a year for several years. The tax treatment depends on the size of the vehicle and whether it's suitable for personal as well as business use.
Trucks (including SUVs) and vans that are configured in such a way that they can be used only minimally for personal purposes are not subject to the dollar limits that apply to passenger vehicles weighing no more than 6,000 pounds. These trucks and vans are referred to as qualified non–personal use vehicles.
Modifications likely to render a truck or van a qualified non–personal use vehicle include having a front bench for seating, permanent shelving that fills the cargo area and advertising or a company name printed on the side.
Write–off limitation: The maximum deduction is a first–year expensing allowance of up to $105,000 in 2005 ($108,000 in 2006). Alternatively, these vehicles can be depreciated over a five–year recovery period; there are no dollar limits to the annual depreciation deductions.
For vehicles with a gross vehicle weight rating in excess of 6,000 pounds (but not over 14,000 pounds), the dollar limits on depreciation also do not apply. However, expensing is limited to $25,000, with excess amounts depreciated over five years.
Special dollar limits apply to the write–offs that can be claimed for the purchase of lighter vehicles weighing 6,000 pounds or less that are not qualified non–personal–use vehicles. These dollar limits are slightly higher than those for passenger cars. The following table shows the dollar limits for light trucks and vans first placed in service in 2005:
| Tax Year | Dollar limit |
| First year (2005) | $3,260 |
| Second year (2006) | $5,200 |
| Third year (2007) | $3,150 |
| Each succeeding year | $1,875 |
You can claim your tax write–offs without respect to your financing arrangements. Thus, even if you borrow to buy, you can claim your first–year expensing and depreciation deductions. With today's low financing, buying a vehicle may make sense for your business. Remember: Leasing may impose restrictions that do not work for you (for example, mileage limitations and a bar on vehicle modifications).
Read more about author and tax expert, Barbara Weltman.