What is the Hummer rule?
Asked by: Arne Carter | Last update: February 5, 2026Score: 4.8/5 (6 votes)
The "Hummer Rule" or "Hummer Deduction" refers to a tax provision under Section 179 of the U.S. tax code that allows businesses to immediately deduct the full cost of certain large, heavy vehicles, like SUVs and trucks over 6,000 pounds, as a business expense, rather than depreciating it over time. Originally intended for actual heavy equipment like bulldozers, it became known as the Hummer Rule because Hummers and other large SUVs fit the weight criteria, enabling significant tax write-offs for business use, though rules and limits have since been adjusted.
What is the Hummer loophole?
Several years ago, Section 179 was often referred to as the "SUV Tax Loophole" or the "Hummer Deduction" because many businesses have used this tax code to write-off the purchase of qualifying vehicles at the time (like SUV's and Hummers).
What is the 6000 pound vehicle loophole?
The 6,000-pound vehicle loophole refers to a U.S. tax code provision (Section 179) allowing businesses to deduct a large portion, or even the full cost, of vehicles with a Gross Vehicle Weight Rating (GVWR) over 6,000 pounds, like heavy SUVs, trucks, and vans, from their taxes in the first year. Originally meant for farmers and contractors, it became popular for deducting large luxury SUVs by avoiding standard depreciation caps, with current deductions potentially reaching tens of thousands of dollars through Section 179 and bonus depreciation, provided the vehicle is used more than 50% for business.
What is the $2500 expense rule?
The $2,500 expense rule refers to the IRS's De Minimis Safe Harbor Election, allowing businesses (without a formal financial statement) to immediately deduct the full cost of tangible property costing up to $2,500 per item or invoice, rather than depreciating it over years. This simplifies taxes for small businesses, letting them expense items like computers or small furniture in one year if they follow consistent accounting practices and make the annual election by attaching a statement to their tax return.
What is the tax loophole for heavy cars?
The Section 179 deduction and bonus depreciation offer businesses significant tax incentives for purchasing heavy vehicles over 6,000 pounds GVWR, but note: The $31,300 figure is the special Section 179 cap for certain passenger-type SUVs and similar vehicles in 2025, while the overall Section 179 limit for 2025 is ...
How To WRITE OFF Your CAR In 2025! (STEP-BY-STEP GUIDE)
Can you write off 100% of a 6000 lb vehicle?
Yes, you can often write off 100% of a vehicle with a Gross Vehicle Weight Rating (GVWR) over 6,000 lbs in the first year using Section 179 Deduction and/or Bonus Depreciation, bypassing typical luxury auto limits, for qualifying business use, but your vehicle needs to meet the weight criteria (not just its unloaded weight) and you must meet business use tests. Vehicles like heavy-duty trucks (Ford F-250/350, Ram 2500/3500) and some large cargo vans often qualify, allowing for significant immediate expensing, but always verify the specific GVWR of the exact model you purchase.
How to get around the luxury car tax?
Once the vehicle reaches six years old, the supplement is no longer payable. From the seventh year onwards, only the standard rate of VED is due. This means the easiest way to avoid the surcharge is to lease or buy a vehicle that is more than six years old or has already passed through its five-year luxury tax period.
What is the $3000 loss rule?
The IRS allows taxpayers to deduct up to $3,000 of realized investment losses ($1,500 if married filing separately) against ordinary income each year. This deduction applies only to losses in taxable investment accounts and must be realized by December 31st to count for that tax year.
What is the IRS hobby income limit?
If you're under 65 and filing as an individual, you must declare your hobby earnings if they total $12,400 or more when combined with your other income. If you're married and filing jointly, the threshold is $24,800 if both spouses are under 65.
What is the $300 depreciation rule?
The "$300 depreciation rule" (mostly an Australian Tax Office rule) allows individuals and some businesses to claim an immediate deduction (100% write-off) for certain depreciating assets costing $300 or less, rather than depreciating them over several years, provided they meet conditions like not being part of a set or used primarily for non-business income production, simplifying tax for small work-related expenses like tools or computer accessories.
Can a car be 100% tax deductible?
Yes, you can write off 100% of a vehicle's cost in the first year if it's used exclusively for business and meets specific IRS criteria, primarily by being a heavy vehicle (over 6,000 lbs GVWR) or a qualifying non-personal work vehicle, using Section 179 expensing or bonus depreciation; otherwise, deductions for standard passenger vehicles are capped, requiring calculation of business-use percentage for either actual expenses or standard mileage rate.
What are the most reliable heavy vehicles?
Ram 3500. For the ultimate in heavy-duty reliability, the Ram 3500 is a top contender. In fact, a recent study identified the Ram 3500 as the pickup truck most likely to last over 250,000 miles. This is a testament to its rugged construction and powerful engine options, particularly the Cummins diesel.
Which cars qualify for 100% capital allowances?
Cars with a CO2 emission of 0g/km or fully electric cars benefit from a 100% First Year Allowance, if they are new and unused. Other expenditure on cars qualifies for Writing Down Allowances based on the CO2 emissions of the vehicle.
Which hummer to avoid?
The Hummer H2 has been known to develop problems like mode door actuator failure, gas cap issues, low oil pressure, and engine stalling, among other things.
What vehicles qualify for 100% bonus depreciation in 2025?
Only vehicles with a GVWR over 6,000 lbs qualify for 100% bonus depreciation without luxury auto limits.
What is the downside to Section 179 deduction?
Section 179's main drawbacks include limiting deductions to taxable business income (no losses), potential recaptured depreciation taxed at higher rates if assets are sold early, phase-out limits for high spending, and state tax complexities; it offers immediate savings but can create future tax obligations or limit future deductions.
What is the 3 year hobby rule?
The "3-year hobby rule," or the IRS hobby loss rule, is a presumption that an activity is a business (not a hobby) if it makes a profit in at least three of the last five consecutive years, allowing you to deduct losses; if it fails this test, the IRS may classify it as a hobby, limiting deductions to only certain expenses like mortgage interest or property taxes on the home used for the activity, and requiring you to report all income.
What is the $600 rule in the IRS?
The IRS $600 rule refers to the reporting threshold for third-party payment apps (like PayPal, Venmo, Cash App) for income from goods/services, where they send Form 1099-K to you and the IRS for payments over $600 in a year. While the American Rescue Plan initially set this lower threshold for 2022 and beyond, the IRS delayed implementation, keeping the old rule ($20,000 and 200+ transactions) for 2022 and 2023, then phasing in a $5,000 threshold for 2024, before recent legislation reverted the federal threshold back to the old $20,000 and 200+ transactions for 2023 and future years (as of late 2025/early 2026), aiming to reduce confusion.
How does IRS know about side hustles?
The IRS knows about your side hustle through third-party reporting, primarily from payment platforms (like PayPal, Venmo, Uber, Etsy) that send Forms 1099-K or 1099-NEC to you and the IRS, and through automated systems that match reported income with third-party data. They also receive income info from banks, employers (W-2s), and other financial institutions, flagging discrepancies if your tax return doesn't match these records, meaning even cash or small amounts can be noticed if reported by others.
How much capital gains tax will I pay on $200,000?
For a $200,000 long-term capital gain in 2025 (for single filers), most of it falls into the 15% bracket, resulting in about $27,000 in federal tax, but the exact amount depends on your total taxable income and filing status, with some potentially taxed at 0% or 20%, plus the possibility of an extra 3.8% Net Investment Income Tax (NIIT) if your income is high enough.
What is the most capital loss you can claim?
The Internal Revenue Code allows taxpayers to claim a capital loss deduction from their annual capital gains. Capital loss deductions from regular income are limited to $3,000 a year. Losses over this limit can be carried forward and claimed in future tax years if you make use of a capital loss carryover.
What is the 20% rule for capital gains?
The 20% capital gains rule is the highest federal tax rate for long-term capital gains (assets held over a year), applying when your taxable income falls into the highest tax brackets, above thresholds set by the IRS (e.g., over $545,500 for single filers in 2026). While 0%, 15%, and 20% are standard long-term rates, higher rates (25% or 28%) can apply to specific assets like real estate with depreciation or collectibles.
What qualifies as a luxury car?
A luxury car provides superior comfort, high-end materials (like premium leather, wood, carbon fiber), advanced technology (infotainment, driver-assist), powerful performance, and exclusive features, elevating the driving experience beyond basic transportation for a higher price, often from recognized luxury brands like Mercedes-Benz, BMW, Lexus, and Cadillac. It's defined by refinement, quality, and features that make a drive more enjoyable, not just practical.
What is the luxury limit for 2026?
The luxury car tax ('LCT') threshold for the 2026 income year is $91,387 for fuel-efficient vehicles, and $80,567 for all other luxury vehicles.
Are electric vehicles taxed differently in 2025?
New Deadline: September 30, 2025
A critical change: the $7,500 tax credit (and the $4,000 used EV credit) will expire on September 30, 2025. Any EV purchase or lease finalized on or before that date qualifies; after that, the incentive disappears, regardless of model or eligibility.