When you’re buying a vehicle for your business, you may be wondering how much of the sales price can be deducted on your next tax return. After all, investing in a new car for your business is certainly more convincing if you can count on valuable tax savings to help offset the initial cost. The IRS has created guidelines to help business owners determine exactly what part of their vehicle purchase is deductible. As a general rule, buying a 6,000-pound vehicle can help you get up to $25,000 in deductions. Other vehicles can also receive valuable tax benefits through Section 179.
Tip
Section 179 of the federal tax code outlines deductions for items purchased for professional purposes. When business owners purchase vehicles that weigh more than 6,000 pounds but less than 14,000 pounds, they should be eligible for the $25,000 deduction in Section 179.
Basics of Article 179
Section 179 of the federal tax code details the various deductions that taxpayers may be eligible for based on annual expenditures. These fees are directly related to qualifying purchases of the property. More specifically, Section 179 addresses depreciation expense used for business equipment. When taxpayers choose to use the cost of the related item as part of an immediate deduction rather than a longer period of depreciation, they can take advantage of the benefits provided by Section 179. In general, Section 179 is designed to incentivize business owners to purchase new equipment for their operations. For many business owners, Section 179 Deduction Vehicle List provides a bridge to connect them with the tools and infrastructure they need to get a head start on the road to longevity and success.
Take a closer look at deductions
Although Section 179 provides benefits to business owners in a wide range of industries and professions, it is important to note that the scope of qualifying purchases remains intentionally limited. Some of the most common items that can be deducted as part of Section 179 include basic office equipment/supplies, vehicles, and productivity tools such as computers and monitors. In order to qualify for the Section 179 deduction, the related item must not only be purchased in a given tax year, but must also be fully used within the same time period. Essentially, business owners seeking a deduction must be able to adequately demonstrate that the items they purchased were actually used for work and not for personal reasons.
Section 179 Vehicle deduction
By far one of the most commonly used Section 179 deductions applies to the purchase of a vehicle. Although the rules governing this deduction have changed over the years, business owners can still deduct a portion of their vehicle purchases on their tax returns. The exact amount deducted depends largely on the type of vehicle purchased. For example, vehicles that can easily be used for personal and professional applications, such as sedans, are generally eligible for deductions of up to $11,160. Trucks are eligible for tax deductions of up to $11,560.
However, the deduction increases if the IRS determines that the vehicle is designed for commercial use. Some of the more common examples of these types of vehicles include vans that can accommodate more than 9 passengers, tractor trailers, and vehicles with fully enclosed compartments for the driver.
6,000 Gross Vehicle Weight Tax Credit
The IRS allows owners to claim deductions of up to $25,000 when the vehicle is purchased for business purposes weighing Vehicles over 6000 Pounds. However, certain guidelines must be followed. Although there is no specific list of Section 179 deducted vehicles for 2019 or other years, the IRS provides sufficient information on vehicle eligibility criteria. Failure to meet these guidelines may result in an inability to claim the Section 179 deduction.
Vehicle deductions and business use
If the vehicle in question is not 100% used for business purposes, it may still qualify for a partial Section 179 deduction. The percentage of the maximum possible deduction available to the filer will be proportional to the time the vehicle is used for business purposes. That being said, if the owner uses the vehicle for business less than 50% of its operating time, all deductions will be void. Carefully document all uses of the vehicle to ensure it is in the owner’s best interest to demonstrate this to the IRS. This type of documentation can be as simple as keeping a mileage record that also describes the destination and purpose of each trip.
Section 179 Deduction Limits
According to IRS guidelines, the maximum Section 179 deduction cannot exceed $1 million. This payment includes not only vehicles purchased for commercial purposes, but also any type of commercial item described above that is also covered by section 179. It’s also important to note that certain items purchased by business owners that qualify for the Section 179 deduction may also qualify for other tax-saving mechanisms, including bonus depreciation.
