Taxes: Bigger breaks for new cars

April 18, 2008

Buy new. When it comes to cars for your practice, that's the message to take away from President Bush's economic stimulus plan.

Buy new. When it comes to cars for your practice, that's the message to take away from President Bush's economic stimulus plan. If you purchase a new vehicle you'll be allowed to deduct $10,960 for 2008, up from just $3,060 last year, according to The Kiplinger Tax Letter. For used cars, the first-year limit drops to $2,960-a difference of $8,000 under the new law. The cap for all vehicles in year two is $4,800 (down $100 from 2007), and remains the same in year three ($2,850) and in all later years ($1,775).

Remember, the rules require you or your employees to use the vehicle for business more than 50 percent of the time in each year you file for the deduction. So to keep the IRS happy, maintain a log with dates, destinations, and mileage counts.