The list of cars that are eligible for the Section 179 deduction is divided by the IRS into three main categories: Light, Heavy, and Other. Each category has a different permitted deduction, which the IRS may raise yearly to reflect inflation. This article will discuss Section 179 automobiles specifically for 2021.
In This Article...
Light Section 179 Vehicles
- any vehicle having a GVWR (gross vehicle weight rating) from the manufacturer that is less than 6,000 pounds (3 tons).
- Numerous passenger cars, crossover SUVs, and compact utility trucks fall within this category.
The Section 179 tax deduction cap for these vehicles for 2021 is $10,200 in the first year of use. In fact, if the additional $8,200 in Bonus Depreciation is also taken into account, your total allowable deduction for 2021 is $18,200.
Heavy Section 179 Vehicles
- any vehicle with a minimum GVWR of 6,000 pounds and a maximum GVWR of 14,000 pounds (3-7 tons).
- This includes a sizable number of full-size SUVs, vans, and pickup trucks.
A vehicle that falls under the “heavy category” is eligible for a Section 179 tax deduction up to $26,200 in 2021. However, through the end of 2022, these vehicles are qualified for 100% bonus depreciation. The annual reduction in the authorized bonus depreciation percentage will begin in 2023.
Other Section 179 Vehicles
- Any vehicle modified for non-personal use OR any vehicle with a GVWR of 14,000 pounds (7 tons). Specifically:
- More than nine passengers can fit behind the driver’s seat in a shuttle vehicle.
- Delivery Vans with a minimum six-foot-long interior cargo compartment that are difficult to reach from the passenger area
- vehicles with a totally enclosed driving compartment, no seats behind the driver, and no section of the body extending more than 30 inches past the windshield.
- Automobiles like ambulances, work trucks, hearses, etc. may also fall under this category.
Any vehicle that complies with the aforementioned weight or modification requirements is exempt from the Section 179 tax deduction cap for 2021. Any car that fits into this category has its full cost deductible.
Section 179 Vehicle Tax Deduction VehicleAn Example
Consider the following scenario to show how you could use a Section 179 car to lessen your tax liability:
- On April 26, 2021, Janine purchased a brand-new $55,000 truck.
- The following day, she started using the car right away.
- She just transports supplies for her little roofing company on the truck.
- The vehicle has an 8,000-pound GVWR.
Janine bought her new truck and used it in the same calendar year. It is exclusively used for business-related operations. The car belongs to the category of “heavy Section 179 vehicles” based on its GVWR.
Janine is fortunate! Her car satisfies all requirements. She qualified for the maximum Section 179 tax deduction for heavy vehicles. In addition, she could write off half of the purchase amount that remained after the Section 179 tax deduction as first-year depreciation. The whole $55,000 would not be covered by this. However, as was already noted, she might decide to take advantage of the 100% bonus depreciation, which would pay for the entire cost of the vehicle.
Need assistance figuring out how much you can write off? Review your case with a Block Advisor small-business certified tax practitioner as you file your taxes.
Where to find your vehicle’s GVWR
Checking your car’s GVWR (Gross Vehicle Weight Rating) will help you determine if it is a Section 179 deduction vehicle. This number is provided by the manufacturer. The maximum weight your vehicle can transport safely is shown by the GVWR. It takes into account the weight of the vehicle, passengers, gasoline, cargo, and any additional equipment.
The GVWR is listed on the manufacturer’s label. This sticker is typically located inside the driver’s side door. It could be a metal plaque or a sticker.
The GVWR can be impacted by equipment and extras, which may prevent a vehicle from being eligible for a Section 179 tax deduction. In order to determine which group your Section 179 deduction vehicle belongs to, carefully examine the manufacturer’s label!
Can a 4Runner be written off?
Can possibly write off up to 100% of the cost of the purchase in the first year. The Toyota 4Runner is the best SUV available. The Pilot offers a large cargo capacity if you need to transport heavier things.
Which vehicles can be written off under Section 179?
In 2022, Section 179 will allow small businesses to deduct a percentage of their eligible business car purchases.
The informational list and guidance below have been updated for 2022. Please contact your accountant with any queries about vehicle eligibility and regulations that apply to your company.
The following vehicles are among those that qualify for a Section 179 Tax Write-Off:
- Heavy SUVs, Pickups, and Vans that are more than 50% used for commercial purposes and weigh more than 6,000 lbs. gross vehicle weight may be eligible for bonus depreciation and at least a partial Section 179 deduction.
- Obvious “Typically, work vehicles that are not intended for personal usage qualify.
- Vehicles used for delivery, such as a traditional cargo van or box truck without passenger seating, may be eligible.
- Specialty “Generally, vehicles with a single purpose, such as an ambulance or hearse, qualify.
The manufacturer’s gross vehicle weight rating (GVWR) must be greater than 6,000 lbs in order to satisfy the weight requirements. The manufacturer’s label, which is typically found on the inside edge of the driver’s side door where the door hinges meet the vehicle’s frame, can be used to determine a vehicle’s GVWR.
The SUVs and trucks on the following partial list may be eligible for a tax deduction.
Section 179 vehicles get you on the road to big tax deductions.
Have you bought or financed a vehiclenew or usedfor your small business? In that case, you can be eligible for a hefty tax break. As long as your vehicle is eligible for the Section 179 deduction, you may deduct all or a portion of its cost in the first year that you use it for business.
The views expressed in this content are meant mainly for general information and do not constitute personalized advice or suggestions for any particular person.
Types of vehicles that are eligible.
Before we get started, it’s important to be aware that the IRS occasionally publishes changes, instructions, and new regulations pertaining to Section 179. Use this information as a starting point; the eligible automobiles are subject to change.
In general, passenger cars, large SUVs, trucks, and vans used at least 50% of the time for business-related reasons qualify for the Section 179 tax deduction. So, for instance, a pool cleaning company may write off the cost of a brand-new pickup truck it uses to travel to and from clients’ houses.
Small vehicles.
Small automobiles are used every day by millions of small enterprises and lone entrepreneurs. These include tiny utility trucks, crossovers, and passenger automobiles. The Section 179 deduction cap for small vehicles under 6,000 pounds is $10,100 in the first year of use and $18,100 with bonus depreciation.
The deduction allowance is proportionately decreased if the vehicle is not utilized exclusively for business. The cap is $5,050 ($10,100 x.50) if a florist, for instance, buys a vehicle that is used 50% for business.
Heavy vehicles.
A commercial vehicle must weigh at least 6,000 pounds and not more than 14,000 pounds to be considered “heavy.” Many pickup vehicles, SUVs, and vans weigh more than 6,000 pounds. On the label or in the vehicle information packet provided by the manufacturer, the gross vehicle weight rating (GVWR) is frequently mentioned. The inside of the driver’s side door, either on a sticker or a small metal badge, bears the manufacturer’s label, which includes the make, model, features, GVWR, and other information.
The maximum Section 179 deduction for heavy vehicles is $25,000 Let’s imagine you borrow $45,000 to buy a large SUV, and you only use it for your little business. Under Section 179, you may write off $25,000 and receive a $10,000 first-year depreciation (half of the remaining purchase price after the Section 179 deduction). Consequently, the $45,000 SUV purchase will result in a $35,000 first-year deduction. In some circumstances, a regular depreciation percentage is applicable, but only a tax expert can establish this.
Special rules.
You will probably learn about some of the particular regulations when you discuss Section 179 for autos with your accountant or tax advisor. One of these laws relates to pay. First of all, your net taxable income for the year cannot be greater than your Section 179 deduction. Secondly, you are not permitted to use your car to transport people or items for rent or payment.
Whether you acquire a new or used car, you have to put it to use, often known as “commercial use,” during the tax year you buy it before December 31. If you choose to take advantage of the Section 179 deduction, you must show documentation demonstrating your car was utilized for business purposes. If your company is ever subject to a tax audit, this will be useful.
Helpful links for small business owners.
Vehicles under Section 179 infographic An illustration of how Section 179 applies to commercial vehicles
impromptu tax planning A must-read if this year’s tax deadline is approaching.
Can I deduct a 6000-pound vehicle in 2021?
A provision of the federal tax code known as the “6,000-pound vehicle tax deduction” permits taxpayers to deduct up to $25,000 off the cost of a car on their tax return. The gross vehicle weight rating (GVWR) of the bought vehicle must be greater than 6,000 pounds but less than 14,000 pounds.
What SUVs are Section 179 eligible in 2019?
If your total investment in qualifying property exceeds $3.57 million in 2019, you are eligible for a section 179 deduction. For tax reasons, large SUVs, pickup trucks, and vans are considered pieces of transportation equipment. Therefore, if utilized more than 50% for business, they are eligible for Sec. 179 expensing and 100% first-year bonus depreciation.
Can an SUV be written off?
Only if the car is utilized exclusively for business purposes AND you purchase it brand-new from the dealer are you eligible for a full write-off (no private party used vehicle). It must be completely new. The figure in the illustration accounts for a new SUV weighing more than 6,000 lbs.
To sum it up:
1) The ratio utilized for business is deductible if it is 100 percent business usage, for example, 65 percent for business use, 65 percent depreciation/deduction schedule. Track your miles! Since it’s uncommon to have 100 percent business use, the example above uses a more cautious 95 percent depreciation rate.
2) Must be a new SUV weighing more than 6,000 lbs.
For SUVs exceeding 6,000 pounds, the IRS permits up to $25K in upfront depreciation (100 percent), PLUS 50% Bonus Depreciation for NEW vehicles that will approach that amount. Over 50% of the miles the vehicle is driven must be for business. You must also subtract the personal usage percentage from the $25K.
Very good! If you want to buy a new SUV, we have a winner here. The IRS permits self-employed people and workers to deduct automobiles under 6,000 pounds using a standard mileage rate, which is 56 cents per mile for business travel in 2021.
You can deduct based on the cost of operating the car if you are unable or unable to do so based on miles. Costs include tires, upkeep, gas, and other expenses. One of the two is true.
What does the SUV gap mean?
This Code provision, sometimes known as the “SUV tax loophole,” is the engine that propels tax incentives, resulting in excellent tax write-offs for small firms and independent contractors that purchase big sport utility vehicles for commercial usage.
Can you use Section 179 for cars?
You must use a vehicle more frequently than 50% for business than for personal use in order to be eligible for the Section 179 deduction. Any Section 179 deduction will be ineligible if used for 50% or less.
Calculate the acceptable deduction if you use a car for business purposes more than 50% of the time but less than 100% of the time. According to the IRS, double the cost of the property by the amount of business usage if you used it more than 50% for business. The cost of the asset that can be written off under Section 179 is the outcome.
Owners typically use mileage to determine commercial use. Take the case where you purchased a car for your company and covered 10,000 miles in the first year. If 6,000 of those were used for commercial purposes, then 60% of those would qualify as Section 179 vehicles. Additionally, if you paid $20,000 for the car, the Section 179 deduction would apply to $12,000 of that amount (60 percent x $20,000).
Which automobiles can I deduct for my company’s use?
- The likelihood that the regular mileage rate will result in a larger deduction increases with the vehicle’s operating efficiency.
- The actual cost method is likely to be more advantageous the greater the operating costs, such as gas, repairs, tires, etc.
Standard mileage rate
The IRS permits self-employed people and staff to use a standard mileage rate, which is 56 cents per mile for business travel in 2021. The tariff is 58.5 cents per mile in the first half of 2022 and rises to 62.5 cents per mile in the second half.
For each business car, you need two numbers to calculate the amount of miles driven for work:
- the total distance traveled throughout the year
- the total distance traveled just for business
It’s easy to keep track of your yearly mileage. When you begin driving a car for business purposes and on the last day of the year, note the odometer reading.
The number of real business-related kilometers that you drive counts toward your mileage deduction. For instance, miles traveled
- to go see a client or meet with a client
- to the office supplies, computer, and bank
- to consult with a lawyer or accountant about business-related issues
Some travel is not regarded as being related to business:
- Commuting involves driving to and from your place of employment. Both your corporate and personal tax returns do not deduct it.
- The additional miles from the store to your home if you stop there on your way home from a work trip are typically regarded as personal mileage, so you can’t normally include them.
In addition to the usual mileage rate deduction, you may additionally deduct auto loan interest, registration and property tax payments, parking fees, and tolls as long as you can demonstrate that they are related to your place of business.