While deducting business use of your vehicle is nothing new, because of the increasing weight of some passenger vehicles and the increase in Section 179 expensing, a greater deduction can be had.

Passenger vehicles are one of several assets called 'listed property' (because they are on a list!): a list of assets which have certain restrictions affecting its annual deduction. Additionally, passenger vehicles have specific annual limits. So the total of Section 179 and depreciation is not unlimited: You can't write off a $15,000 car in one year. There is even a new category for 'light' trucks and vans (see above).

However, a passenger vehicle whose gross weight is over 6,000lbs (think some SUV's) is not considered listed property, and so doesn't fall under this restriction. You could write off the entire business cost. A write-off for a $50,000 SUV used 90% for business has a basis of $45,000. Take the Section 179 of $45,000, in essence you are deducting $45,000 from income. Someone in the 25% tax bracket could benefit up to $11,250 (providing that they had tax liability in excess of this to begin with, without getting into a discussion of net operating losses!)

And why think about buying a new van now? Because the $100,000 write-off limit is scheduled to revert back to $25,000 in 2006.

So next time you hear a car dealer shout about deducting your SUV, you'll know ... this isn't something new. It's just that now the write-off might be a lot more!