Business owners have the opportunity to make their next BMW purchase even more rewarding thanks to the potential benefits made possible by Sections 179 and 168(k) of the IRS tax code. In fact, choosing a new BMW X5, X6, or X7 SUV instead of a luxury sedan can be a smart decision that provides plenty of advantages not only for you, but for your business as well. But there have been important changes for the 2024 Tax Year, which we cover below.
Section 179 of the IRS tax code allows businesses to deduct the price of qualifying equipment, such as vehicles, purchased or financed during the tax year. The Internal Revenue Service breaks down the list of vehicles that qualify for Section 179 deduction into three primary groups: Light, Heavy, and Other.
Three BMW SUVs meet the requirements of the “Heavy” category – which is defined as vehicles with a GVWR (gross vehicle weight rating) over 6,000 pounds, but not more than 14,000 pounds. These three vehicles are the BMW X5, BMW X6, and BMW X7 SUVs.
For the 2024 tax year, Section 179 allows for a maximum depreciation of $30,500 for “Heavy” vehicles in the current tax year, provided the vehicle is bought and put into service before January 1, 2025 and also meets certain other conditions below:
Additionally, Section 168(k) allows for additional “Bonus Depreciation” amounting to 60% of the purchase price of a BMW X5, X6, or X7 through the end of 2024, which when added to the $30,500 from Section 179, can deliver a dramatic first-year depreciation tax deduction for BMW SUVs purchased in 2024. But starting in 2025, the allowable bonus depreciation percentage will decrease to 40%, meaning this tax benefit will be less impactful next year.
|
Depreciation Example |
“Heavy” Section 179 |
“Light” Section 179 |
|---|---|---|
| 2024 IRS Section 179 Maximum 1st Year Depreciation | $30,500 | $12,500 |
| Section 168(k) Bonus Depreciation | 60% of Purchase Price | Capped at $8,000 for Luxury Vehicles |
| Qualifying Vehicles | New & Used | New & Used |
|
Example Vehicle |
BMW X7 xDrive 40i |
Some Other Luxury Sedan |
| Purchase Price | $90,525 | $90,525 |
| First Year Section 179 Maximum Depreciation | $30,500 | $12,400 |
| First Year Section 168(k) Bonus Depreciation | $54,315 | Capped at $8,000 |
| Total 1st Year Depreciation | $84,815 | $20,400 |
Additional 1st Year Depreciation for “Heavy” Section 179 Vehicles |
$64,415 | – |
Individual tax situations may vary. The information presented was accurate at time of publishing. Federal rules and tax guidelines are subject to change. Consult your tax advisor for complete details on rules applicable to your business.
**With Gross Vehicle Weight Ratings (GVWR) of more than 6,000 pounds, the BMW X5, X6, and X7 SUVs are classified as “Heavy SUVs”. Gross Vehicle Weight Rating (GVWR) is the manufacturer’s rating of the vehicle’s maximum weight when fully loaded with people and cargo.
**REMINDER: If you have any questions, be sure to contact your tax professional for exact recommendations and rules related to Section 179 and vehicle eligibility.**
Luxury car depreciation can continue year two at $19,800, year three at $11,900, and subsequent years at $7,160 until the vehicle is fully depreciated or sold.
*Comparisons based on Section 179 and 168(k) of the Internal Revenue Code, which allows for additional first year depreciation for eligible “Heavy” vehicles and reflects figures for owners who purchase vehicles for 100 percent business use and place vehicles in service by January 1, 2025.
