3 Tax Strategies Dealers Used in 2024 — and How They Might Change

1. Accelerated Depreciation & Bonus Expensing

2024 Strategy: Many dealerships took advantage of 60% bonus depreciation and Section 179 expensing—especially for Qualified Improvement Property (QIP). This included interior upgrades like HVAC, fire protection, roofs, and security systems. These could be deducted up to the $1.2 million Section 179 limit, helping offset facility improvements in growing dealership groups.

Proposed Change:
The new tax bill would reinstate 100% bonus depreciation from January 2025 through 2029, including some manufacturing and production buildings.
Additionally, Section 163(j) would be amended to allow depreciation and amortization to be added back when calculating the limit on business interest deductions—potentially unlocking larger interest deductions (excluding floor plan financing, which remains deductible).

2. Pass-Through Entity (PTE) Tax Election

2024 Strategy: Dealerships operating as pass-through entities (like S corps or partnerships) have increasingly used the PTE tax workaround, allowing them to deduct state taxes at the entity level—avoiding the personal SALT deduction cap and maximizing deductibility.

Proposed Change:
The bill would raise the SALT cap to $40,000 for individual taxpayers with under $500,000 in income, phasing down above that threshold. At the same time, the legislation would limit or eliminate the use of PTE workarounds, reducing this popular planning option for many dealer-owners.

3. Section 199A Pass-Through Deduction

2024 Strategy: Dealers structured pass-through income to qualify for the 20% deduction under Section 199A, which reduces the effective tax rate on qualified business income.

Proposed Change:
This deduction would be made permanent and increased to 23% for tax years starting after 2025. The phaseout thresholds would also be adjusted based on wage and asset tests, and dividends from Business Development Companies (BDCs) would now qualify.

Additional Tax Changes That May Impact Dealerships

Domestic R&D Deduction Restored

From 2025–2029, immediate expensing of domestic research and development (R&D) would return under Section 174—critical for auto groups investing in systems, software, or data infrastructure.

Auto Loan Interest Deduction

The bill introduces a new above-the-line deduction for up to $10,000 of interest on a U.S.-assembled passenger vehicle loan (2025–2028).
Phaseouts begin at $100K (individual) and $200K (joint). Fleet, commercial, and lease vehicles are excluded.

Implication: This could incentivize retail vehicle sales and help dealerships promote eligible financing programs.

Clean Vehicle Credit Phaseout

Several EV-related tax credits would expire after 2025, including:

• Previously owned clean vehicle credit (Section 25E)
• New clean vehicle credit (Section 30D) unless manufacturer sold fewer than 200,000 units since 2010
• Commercial clean vehicle credit (Section 45W), unless under contract by May 12, 2025

Implication: Dealers in the EV space should prepare for shifting incentives that may affect consumer behavior and inventory planning.

What Dealers Should Do Now

With potentially sweeping changes arriving as soon as 2025, now is the time for dealerships to revisit their tax strategies and entity structures. From depreciation planning to entity elections and EV inventory decisions, proactive guidance is key.

Prepare for What’s Next

Speak with a dealership-focused tax advisor who understands both the operational and compliance sides of the business.
The tax landscape may shift—but strategic planning puts you in the driver’s seat.