Original article from The Kiplinger Tax Letter, Vol. 96, No.17
There are lots of breaks for buyers of business vehicles under the tax laws. The annual depreciation caps for passenger autos rise a bit in 2021. If bonus depreciation is claimed, the first-year ceiling is $18,200 for new and used cars first put in service this year. The second- and third-year caps are $16,400 and $9,800. After that…$5,860. If no bonus depreciation is taken, the first-year cap is $10,200.
Buyers of heavy SUVs used solely for business can write off the full cost, thanks to bonus depreciation. SUVs must have a gross weight rating over 6,000 pounds.
Also, up to 100% of the cost of a big pickup truck can be expensed. When expensing business assets, the amount expensed can’t exceed taxable income from the taxpayer’s business. Bonus depreciation does not have this limit.
Leasing a vehicle to use in your business is much cheaper taxwise in 2021. If a car that is worth more than $51,000 is first leased for business during the year, the lessee must pay income tax each year on an amount spelled out in IRS tables. For example, on a three-year lease for a $75,000 car with a lease term starting in 2021, you reduce the size of your tax deductions for the monthly payments on the vehicle by $8 in 2021, $18 the next year and $26 in 2023. See Rev. Proc. 2021-31.
Employers that claim the Work Opportunity Tax Credit get a welcome easing: Firms have until Nov. 8 to file certification requests for some workers. Normally, employers must submit Form 8850 to a state employment security agency within 28 days of the employee starting work to certify that the hiring is credit-eligible. However, because of Congress’s late action on tax extenders, IRS is giving employers more time to file the 8850 for certain employees. The extended Nov. 8 deadline covers employees who live in an empowerment zone…a designated area of high poverty and unemployment…who begin work on or after Jan. 1, 2021, and before Oct. 9, 2021.
Workplace disaster-leave sharing programs can cover COVID-19-related leave. Firms with qualified disaster-leave sharing plans can permit workers to deposit leave in a leave bank, to be used by other employees affected by the coronavirus pandemic. The donor isn’t taxed on the donated leave and cannot take any tax deduction.
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