Tesla Motors will soon introduce a brand new electric SUV, dubbed the Model X. Based on statements Tesla has made about the new car’s specifications, it appears it will qualify for a particularly large depreciation deduction. Something to keep in mind if you’re in the market for an electric SUV with a base price over $81,000.

Tesla Tax Deduction

It appears that the Model X will weigh over 6,000 pounds. This is significant for tax purposes because cars, SUVS, trucks, vans and other four-wheeled vehicles that weigh more than 6,000 pounds are not subject to the stringent annual limits that apply to depreciation of passenger vehicles that weight less than this amount

Thus, for example, purchasers of a Model X may be able to deduct in a single year up to $25,000 of the cost using a provision of the tax code called Section 179. They’ll also be able to deduct in the first year up to 20 percent of the remaining cost using regular depreciation.

Download MileIQ to start accurately tracking your miles »

Moreover, if Congress extends 50 percent bonus depreciation to 2015 and later years, they’ll be able to deduct 50 percent of the cost the first year as well. However, 50 percent bonus depreciation expired at the end of 2014 and it’s unclear if Congress will extend it to 2015 and later years.

In contrast, if the Model X weighed less than 6,000 pounds, it would be classified as a passenger vehicle for tax purposes and the total deprecation deduction allowed for the first year it was placed in service would be limited to a measly $3,160.

Keep, in mind, however, that all these numbers are based on the purchaser using the vehicle for business purposes 100 percent of the time. If you use a vehicle for both business and personal uses, your total annual depreciation deduction must be reduced by the percentage of personal use.

For example, if you use a Model X 60 percent of the time for business and 40 percent for personal use, your annual depreciation deduction would be reduced by 40 percent. Moreover, you must use the vehicle over 50 percent of the time for business to qualify for the Section 179 deduction as well as 50 percent bonus and accelerated depreciation.

Stephen Fishman

Stephen Fishman

Stephen Fishman is a self-employed tax expert and regular contributor to MileIQ. He has dedicated his career as an attorney and author to writing useful, authoritative and recognized guides on taxes and business law for entrepreneurs, independent contractors, freelancers and other self-employed people. He is the author of over 20 books and hundreds of articles, and has been quoted in The New York Times, Wall Street Journal, Chicago Tribune, and many other publications. Visit Fishman Law and Tax Files for more information on his work.
Stephen Fishman