Tax exemption on agricultural vehicles for rural residents? Not so fast – The Hollywood Reporter

Illustration of confusion

Rivians are so angry in Los Angeles — and the influx of electric trucks and SUVs has highlighted an old IRS provision that people casually brag over lunch about claiming them as farm vehicles for tax benefits.

When it was enacted in 1958, Section 179 was aimed at trucks with a gross vehicle weight rating of more than 6,000 pounds that were used for business — such as commercial trucks, work trucks.
Pickup trucks and farm equipment outfitted — but what the IRS didn’t expect was the group of oversized personal vehicles that hit the road in early August and met the weight standard, like a 2001 luxury Range Rover that weighed in at 6,130 pounds.

Keen-eyed CPAs have begun classifying these luxury SUVs as commercial vehicles and taking depreciation deductions. If they ran the tax returns correctly, there were a ton of additional depreciation deductions that were as big as a Hummer EV.

Fast forward to 2023, and a new crop of formidable electric vehicles — including the trendy, 7,173-pound Rivian R1T pickup truck — are starting to see a similar craze with hopeful Section 179 rebates.

Irvine-based Rivian has ramped up production to meet demand, delivering 15,564 R1T pickup trucks (starting at $73,000) and R1S SUVs ($78,000 and up) to customers in the third quarter of this year. So, no, your eyes aren’t deceiving you if you suddenly see them everywhere in Los Angeles

With new electric cars like Rivian hitting the market, a group of social media influencers have started talking about a top tip they’ve “recently discovered” — with the right tax strategy, those six-figure EVs are magically free. Which, of course, is just pure hyperbolic clicks.

Because of the social hype, actual professionals are forced to bring their clients back down to earth. Business manager Jason Schneider jokes: “Financial experts at TikTok, please stop trying to convince my clients that luxury SUVs are great investments because of depreciation rules!”

While Section 179 is a very real deduction when used as intended, many business managers say off the record that they would never take the deduction for their non-farm customers because it is a red flag for an audit.

“I think it’s nonsense.” says Matt Farah, host of the popular show Smoking pictures Podcaster and founder of Westside Collector Car Storage, who objects to discounting on ethical grounds due to the climate crisis. “It’s ridiculous for people to twist the law and deduct,” he says, adding that incentivizing “giant electric SUVs and luxury cars that are not used for any work of any kind” is environmentally and ethically questionable. “Also, it’s quite suspicious, and if you were audited, you’d be wrong,” he adds.

This story first appeared in the October 25 issue of The Hollywood Reporter magazine. Click here to subscribe.