If you use a Utility Terrain Vehicle (UTV) for Small Business or Farming purposes, you may be able to deduct its cost on your taxes.
UTVs are commonly used by farmers, ranchers, and other professionals who need a vehicle that can handle rough terrain.
To qualify for the tax deduction, however, you must use the UTV primarily for business purposes. This article will explain how to claim the UTV tax deduction and highlight some of the restrictions that apply.
Lets Learn how to get Maximum UTV Tax Write Off in 2021-2022.
- 1 Utility Terrain Vehicle (UTV) Tax Write Off
- 2 UTV Lease Vs Purchase
- 3 UTV De Minimis Rules
- 4 UTV Tax Write off California
- 5 UTV Section 179 Tax Deduction
- 6 UTV Bonus Depreciation
- 7 Conclusion
- 8 Learn More
Utility Terrain Vehicle (UTV) Tax Write Off
In order to write off a UTV it need to meet many requirements for you to be able to take it as a Tax Write off. These requirements include but are not limited to
Business Percent Use
IRS requires you to keep track of your miles so you can determine if you are using your business vehicle 70% for business or 90% for your business. You are only allowed to write off the amount that is used for business and not for personal.
Ordinary and Necessary
In order for the UTV Tax deduction to be allowed, it need to be ordinary and necessary in the field of work you are in.
For example if you are a Farmer and use the UTV to haul feed, supplies for your farm, along with your other Farm Equipment then you can definitely deduct that on your farm tax. Similarly, if you are a Small Business Owner then
Gross Vehicle Weight
If the Vehicle is 6000 pounds or more, then you are allowed to write off full value of the vehicle as long as its 100% business use and placed in the service in the year you are doing the tax write off for.
If any vehicle is less than 6,000 pounds max you can do in 2022, is $18,200 first year and remaining over 5 year period.
UTV Lease Vs Purchase
Lease Example & Calculation
If you lease a UTV for your farm or Small Business, you get to write off the actual amounts you paid for example if you lease UTV ( 36 Month Lease) and Put $3,000 Down Payment(Lease Buy Down) and $200 Per month for the entire year. Then you write off the lease as following:
Lease Deposit $3000 Divided by Lease Term 36 Months So you will get $1,000 Per year
Yearly Lease Payment: $200 Times 12 Months is $2400
Total Tax Write off $1,000 Plus $2,400= $3,400 for the year.
Purchase Example & Calculations:
If you purchase the Utility Terrain Vehicle (UTV) for $20,000 and put down $5,000 and finance the remaining over 60 months the calculations will work the following way assuming 100% business use:
You can use Either Bonus Depreciation to write off the entire $20,000 or Use Section 179 Deduction to write off the total amount. Difference is, Bonus depreciation will allow you to have you net income negative while in case of Section 179 you can only take this deduction as long as your business or farm profit doesn’t go below Zero.
UTV De Minimis Rules
If you purchase a used or even a new UTV for 2500 or less, you can expense that under IRS De Minimis Rules.
This rule applies to each unit i.e. if you buy 3 UTVs,
Two for $2500 or less and third one for $10,000.
First Two UTVs you can write off under De Minimis Rule(Because Purchase Price was 2500 or Less) and 3rd that you purchased for $10,000 you have to use either Section 179 or Bonus Depreciation to write that off.
UTV Tax Write off California
California has very specific rules pertaining to depreciation and limits any Section 179 to $25,000 Maximum per year. So for example, if you purchase two UTV’s for Total Price of $40,000
you can write off $25, 000 as Section 179 in first year and remaining amount of $15,000 in this example has to be spread over 5 year period.
For Federal Return you can use Bonus Depreciation and get full tax write off of $40,000.
While IRS allows Bonus Depreciation, California doesn’t allow Bonus depreciation and the entire amount is added back to your State return where it is taxed.
So In summary Federal Tax Write off $40,000(Using Section 179 and Bonus Depreciation)
CA State Tax Write off Maximum $25,000. Remaining $15000 spread over 5 year period.
UTV Section 179 Tax Deduction
Internal Revenue Code, Section 179 Deduction allows you to expense 100% of the purchase price of the equipment upto $1,080,000 as long as your net income stays 0 or higher.
If you are looking to write off the entire purchase price and have net income as negative, look into Bonus depreciation rules that were passed under TCJA, in this case you can use bonus depreciation and have negative net income that you may be able to offset against other income from other businesses.
To learn more about Section 179 See Details here
UTV Bonus Depreciation
Bonus Depreciation has been significantly improved by the Tax Cuts and Jobs Act.
Under new TCJA, Bonus Depreciation allows you to deduct a specified percentage of the cost of assets in the year they are placed in service.
This deduction allows you to take your profit to negative as compared to Section 179 which only allows you to break even or make your profit zero.
Tip: Under Bonus Depreciation rules, you can even purchase a Used UTV and use Bonus Depreciation.
The UTV tax deduction is a valuable benefit that can save taxpayers money.
If you own or operate a utility terrain vehicle for business purposes, be sure to keep track of your expenses in case of an IRS Audit and take advantage of this deduction when you file your taxes.
Our Tax blog provides in-depth information about the UTV tax deduction so that you can make the most of it.
Be sure to read our latest tax blog and posts to stay up-to-date on all the latest changes and news related to this topic.