New Tax Law Could Influence Car-Buying Decisions

BY STEVE DINNEN

The new tax bill has some good news and some so-so news for car buyers, depending on how you buy the car.

For starters, the law limits to $10,000 the combined amount from state property and sales tax payments that can be claimed as deductions if you itemize your return. A big-ticket item such as a 2018 model S550 4Matic Sedan Mercedes Benz currently on show at Mercedes Benz of Des Moines will generate a $6,748 sales tax bill if you pay the list price of $112,480. That leaves only $3,252 for your property tax bill.

If you’re buying a car for your business and qualify for a bonus depreciation, this tax bill works in your favor. That tax code meant for equipment purchases (including autos) had allowed a 50 percent write-off in the first year and was due to phase out in three years. Now, it’s a 100 percent write-off and goes through 2022. The tax bill also now covers used equipment, as well as new.

For a business purchase of a luxury auto that does not claim the bonus depreciation, there is a boost in the allowable depreciation.