You may deduct up to $25,000 from the cost of vehicles (for one year) that weigh between 6,000 and 14,000 pounds or more in the year that they are put into service under Internal Revenue Code Section 179.
The maximum section 179 deduction for a Model Y that weighs less than 6,000 pounds is $10,200.
(Please note that the maximum tax deduction is $18,200, which can be obtained by adding an additional $8000 in bonus depreciation to the section 179 deduction.)
We advise buying a car that weighs more than 6,000 pounds if you want to take advantage of bonus depreciation laws that were introduced under the Tax Cuts and Jobs Act. Consider the Tesla Model X in this situation.
In This Article...
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.
Do I qualify for a Section 179 truck?
Cars can be brand-new or used (“new to you is the key). The car must be purchased in a “arms-length transaction,” funded using specific approved leases and loans, and titled in the name of the business and not the business owner.
These depreciation restrictions are reduced by the appropriate percentage of personal use if the vehicle is utilized for business less than 100% of the time. The vehicle must also be used for business at least 50% of the time.
It’s important to keep in mind that you can only claim Section 179 for the tax year in which the vehicle is “put in service”that is, when it is ready and accessible, even if you aren’t using it. A vehicle that was first used for personal purposes is also ineligible if it is later used for business purposes.
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.
Which automobiles are eligible for a tax write-off in 2021?
Depreciation and IRC179 expensing deductions for passenger cars are subject to cash limits under IRC 280F(a). Even though it applies to cars that aren’t often thought of as “luxury automobiles,” this restriction is frequently referred to as the “luxury automobile depreciation limitation. By definition, passenger cars weigh 6,000 pounds or less gross vehicle weight.
The following luxury cars placed in service in 2021 are eligible for the following maximum depreciation deductions (including section 179 expenditure deductions):
The first-year cap is raised to $18,200 for new or used passenger cars that qualify for bonus depreciation in 2021, an increase of $8,000 over the previous cap.
The effect of claiming bonus depreciation on future depreciation deductions must be taken into account by taxpayers who purchase a passenger car subject to the IRC280F limits. A safe harbor is provided by Rev. Proc. 2019-13, which permits an annual deduction.
What vehicles weigh more than 6000 pounds?
These kinds of cars are utilized for a variety of purposes, including personal mobility and work places. These trucks have all 6000 pounds of power you could possibly need!
- 2022 GMC Sierra 1500+ and Chevrolet Silverado 1500+
- 2022 Ford F-150+
- Jeep Gladiator 2022
- Nissan Titan, 2022
- 2022 Ram 1500+
- Ram ProMaster 2022
- Toyota Tundra 2022
What percentage of a car can you write off?
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.
A pickup vehicle may be written off.
You may be qualified for a first-year bonus depreciation of 100% if you purchase a new or used “large SUV, pickup, or van this year and utilize it for your business. In other words, you can deduct the entire company share of the expenditure on your tax return for this year. The only prerequisite is that you must utilize the car for business purposes more than 50% of the time. You may deduct that portion of the expense if commercial usage is between 51 and 99 percent.
Your federal income tax bill and, if applicable, self-employment tax bill will both be reduced by the write-off. A state tax income deduction may also be available to you. Nice! Thanks to the Tax Cuts and Jobs Act, this almost too good to be true discount is available (TCJA).
More good news: You may be able to save money on taxes by setting up a home office.
The advantages of combining these two tax incentives under the new law are as follows.
For qualifying cars purchased and put into operation between September 28, 2017, and December 31, 2018, there is a 100 percent first-year bonus depreciation allowance. However, it is just accessible for newly purchased SUVs, pickup trucks, or vans with a manufacturer’s gross vehicle weight rating (GVWR) greater than 6,000 pounds (not leased). For lighter automobiles, the first-year depreciation deduction cap is substantially lower ($18,000 for 2018).
The GVWR is often printed on a label that is attached to the inside edge of the driver’s side door.
As I mentioned earlier, you can only take advantage of the tax-saving first-year bonus depreciation agreement if you use your large SUV, pickup, or van for commercial purposes more than 50% of the time. By dividing business mileage by overall mileage, you can get your business-use % for the year.
So far, so good, but small business owners occasionally struggle to pass the “over 50% business use” standard. Fortunately, if you have a home office that counts as your major place of business, your chances of passing increase significantly. Then you can deduct all of the travel distance from your home office to temporary workspaces (such client locations) as business mileage. The same applies to travel distances between your home office and any other regular workplace (such as another office you keep downtown). The distance between any other regular place of business (like your downtown office) and temporary work sites might also be considered business mileage. These journeys can result in significant business mileage! Simply by driving around in your large car, you can easily accumulate enough business miles to pass the over-50 percent-business-use test.
Additionally, increased business mileage increases the first-year depreciation deduction. For instance, if you spend $60,000 on a heavy SUV in 2018 and use it 80% for business, your first-year bonus depreciation deduction will be $48,000 (100% x 80% x $60,000). Your first-year deduction is reduced to $36,000 (100 percent x 60 percent x $60,000) if your company consumption is 60 percent. Even though it’s still rather nice, a $48,000 write-off is still preferable.
Finally, eligible home office expenses are deductible company expenses that, if applicable, will lower your federal income tax as well as self-employment and state income tax liabilities.
There are two distinct ways for self-employed people (sole proprietors, partners, and LLC members) to qualify their home office as their principal place of business.
Second Option: Work from home in your workplace to manage and administrate. You cannot, however, make extensive use of any other fixed location (such as another office downtown) for management or administrative tasks in order to benefit from this qualification requirement.
In either case, you must consistently and only use the home office space for work-related activities during the whole year. You might have to wait until the following year to purchase your large SUV, pickup truck, or van and set up your deductible home office because exclusively means no personal usage at any point throughout the year. No issue. You will have more time to look around for the ideal car.
Attention: Under present regulations, you cannot deduct home office expenditures if you are an employee of your own firm. The TCJA does away with unreimbursed employee business expenditure deductions for the years 2018 through 2025, which explains why.
The home office deduction privilege plus the 100% first-year bonus depreciation break for heavy vehicles may be combined, offering significant tax savings. It’s a double win for tax reduction!
Is my truck deductible as a business expense?
If you solely use your car for work, you can write off the whole cost of ownership and operating (subject to limits discussed later). If the car is used for both business and pleasure, you can only deduct the expense of the business use.