I'm Nicole Lappin, the only financial expert you don't need a dictionary to understand. It's time for some money rehab. Of course, I am not about that gatekeeping life. If I come across any tax tip or savings hack, I love to share it with you ASAP. You might know I have a Range Rover and I love her. So when my car dealer emailed me about the Range Rover being a £6,000 write-off last month, I was so excited to tell you about it. This tax hack is often known as the G-Wagon write-off or loophole. But I haven't taken advantage of this tax hack myself, and whenever I come across a tip that I haven't personally used, I always do extra research and fact-checking before bringing it to you because, of course, they do. Sometimes, I reach the conclusion that what's presented as truth is actually financial fiction. That is pretty much what I found with the G-Wagon write-off. Let's talk about how much you can really save on heavy SUVs using bonus deductions and part of the tax code called Section 179. Of course, they would have such a boring ass name for it. That's why no one has ever heard of it.

But Section 179 has all the rules about what you can and can't write off as depreciating business assets. Even though you might have seen some TikTok videos about it, this tip is paying out less and less every single year. So if you're thinking about making any big business purchases, this is hopefully your wake-up call to try and do it before December 31st. Back to that email from the car dealer, which read, quote, four SUVs that weigh over 6,000 pounds but no heavier than 14,000 pounds, the full 100 % of the cost can be depreciated. Quick dictionary note here, depreciation is the value an asset loses over time. It's also an accounting term that means spread the value of something out over a period of time. So here in the email from my car guy, it's being used to refer to tax breaks that come from writing off lost value over time. Let's double-click on depreciation. I'm going to use a camera for an example. If you're a wedding photographer, you can't just show up with your iPhone, snap a few picks, and peace out. You need a real camera, and those things are expensive. Say you spend two grand on a camera.

As soon as you take that thing out of the box and take it to the first wedding, the camera starts to lose value and you can no longer sell it for what you bought it for. The longer you have it, the less it's worth. The price has depreciated. The government knows this and allows you to write off a percentage of depreciation each year. A write-off is just a sum of money that you can subtract from your taxable income. So this means you'll pay less in taxes overall since you're taxed on a smaller amount. In Section 179 of the US tax code, the IRS has classified just about everything you can imagine into classes of depreciation. The classes are two years, five years, and seven years. And when I say they've classified everything, I mean it. If you deep dive, you will see everything from lemon trees to industrial oil drills. A camera, by the way, depreciates in five years. So this means for a $2,000 camera, you can write off 400 bucks each year for five years from your taxable income. That is great. But if you're just starting out, you need all the money you can get your hands on ASAP.

And that's when bonus deductions come into play. The Tax Cuts and Jobs Act in 2017 allowed us to write off 100 % of depreciating assets in one year instead of spreading it out over two, five, or seven years. But that deal started to get phased out in 2022. In order to phase this out, the amount the IRS says you can write off decreases 20 % each year. For 2023, the write-off is still 80 %, but next year in 2024, it's going to go down to 60 %. If you're planning to make any big purchases for your business, I would get on that by the end of the year. So to qualify for a write-off at the full 80 %, you need to buy and start whatever you bought in 2023. Let's circle back to cars, though, and that infamous email. It said that a car over £6,000 and under £14,000 could be written off 100 %. Now, we've already busted the myth that anything bought in 2023 can get a hundred % of the write-off for 2023. What about the rest of the myth? Let's start at the beginning here. Are any cars even eligible?

To be eligible, the car needs to be over 6,000 and under 14,000 pounds. Cars can vary so much. But for the most part, the Land Rover, Range Rover, the Cadillac, Escalade, the Porsche Cian, and yes, the G-Wagon are all eligible. Let's take the G-Wagon, for example, because this tax move is often called the G-Wagon write-off. The starting price for a G-Wagon is a cool 141k. We now know that you can only write off 80 % of your depreciating assets. So 80 % of 141 grand is $113,000-ish, which is quite a nice chunk of change to count against your taxable income, but not so fast. Because there's a limit of how much you can write off when it comes to your car, the limit for a deduction on an SUV between 6,000 pounds and 14,000 pounds is $28,900, which I think we can all agree is a lot less than 113 grand. And it might be even less than that. If you're angling for this type of deduction, you definitely need to work with a pro on this because there's a lot of fine print and you're going to need somebody who specialized in taxes to decode it all.

There are exceptions to this limit where you can write off more, but the exceptions are very specific. The car has to seat nine people behind the driver or have a cargo area of greater than 6 feet, which cannot be reached from the passenger seat. Luxury SUVs definitely don't meet these requirements. So net-net, my dealer's email was absolute clickbate. I definitely can't write off 100 %, but it sounds like I can write off the minimum of $28,900 from the cost of my car as a depreciating business asset. But again, not so fast. This is a business write-off, remember? So you can only write off the percentage of your car that is used strictly for business. So if you own a limousine company and you buy a Cadillac Escalade to pick up passengers at the airport and take them to their hotels, and that is all you use your cars for, you can absolutely write off $28,900. But what if you are a real estate agent with a brand new Porsche Cayenne that you use to take clients to showings, meet with appraisers, pick up staging furniture for rental places. Then when you're not working, you use the same car to go grocery shopping, to go to the gym, to drive to your mom's for the holidays.

In that situation, you need to figure out the very specific percentage of time that you are using the car for work versus personal needs. There are apps that can help you track this stuff. That percentage, though, is going to determine just how much of the car you can write off. And before you suggest it, no, commuting to work actually doesn't count. Making a work phone call from your car while driving doesn't even count. And no, even sticking an ad for your business on your car does not mean that you can make the argument that all driving is work related. It's weird. It sucks. I know. I know I've been slamming this loophole pretty hard. The truth is it can be a very useful write off that saves you a lot of money on your tax bill, but it is not the Silver Bullet hack that it's made out to be. And it is certainly not a reason to get a G-Wagon. For today's tip, you can take straight to the bank. I mentioned that getting your car wrapped doesn't mean that all driving is work-related and deductible, but the actual cost of doing the rep or getting a sign made, now that is totally tax deductible, and this for real of marketing can be a great way to advertise.

Bethany Frankl famously did this for her cocktail brand, Skinny Girl. But if the idea of wrapping your whole car sounds way too out there for you, any type of branding for your business: a baseball hat, a T-shirt, that is all tax deductible too. It's just also a more low key way to get the word out than turning your car into a billboard. Money Rehab is a production of Money News Network. I'm your host, Nicole Lappin'. Money Rehab's executive producer is Morgan LaVoy. Our researcher is Emily Holmes. Do you need some money rehab? And let's be honest, we all do. So email us your money questions, moneyrehab@moneynewsnetwork. Com to potentially have your questions answered on the show or even have a one-on-one intervention with me. And follow us on Instagram @moneynews and TikTok @moneynewsnetwork for exclusive video content. And lastly, thank you. Seriously, thank you. Thank you for listening and for investing in yourself, which is the most important investment you can make.