Section 179 Work Vehicles Deduction
Understanding How to Maximize Your Equipment Financing Savings with a Section 179 Tax Deduction
Vehicle purchases can be a big expense for a business. Whether you’re a contractor or a caterer, a landscaper, or a locksmith, your operation could stall or even come to a complete standstill if you don’t have the necessary wheels. Business owners considering buying new or used commercial vehicles, including work trucks or vans, should understand how to take advantage of the accelerated depreciation available through IRS Section 179.
What is IRS Section 179?
IRS Section 179 is a section of the U.S. tax code that provides a write-off for specified equipment purchases – including vehicles – as soon as they are put into service. This government incentive rewards businesses that invest in themselves by purchasing equipment that helps stimulate the economy. It effectively lets you maximize your business’s profitability while investing in the necessary equipment to succeed. Be sure to consult your tax advisor to determine the tax ramifications of equipment purchases and Section 179 savings. The benefit is that small and mid-sized companies can deduct the equipment as a current expense rather than having to depreciate it, which puts them in a stronger financial position. The purchases and in-service dates must be completed by December 31 to qualify for the appropriate tax year. Vehicle purchases are one of the most popular uses of Section 179. Here are some important points to consider when planning to buy a work truck or van:
What vehicles are covered by Section 179?
Section 179 applies to work vehicles that meet certain criteria, including:
- Pickups and vans that are used for business more than 50% of the time and exceed 6,000 pounds gross vehicle weight.
These vehicles may qualify for at least a partial Section 179 deduction, plus bonus depreciation.
- Vehicles that are obviously for work and cannot double as personal vehicles, such as forklifts or trailers, or those that seat more than nine passengers behind the driver’s seat, such as hotel or airport shuttle vans.
- Delivery-type vehicles, such as cargo vans or box trucks with no passenger seating.
- Specialty work vehicles such as hearses or ambulances.
These vehicles all have the required manufacturer’s gross weight rating (GVWR) of at least 6,000 pounds. To verify the rating, check the label on the inside edge of the driver’s side door near where the hinges meet the vehicle’s frame.
You can browse our inventory of work trucks and vans or contact our commercial vehicles team for additional information.
What is the allowance for commercial vehicle depreciation?
Section 179 has specific dollar limits on how much you can deduct. The limit for 2023 was raised to $1,160,000, and the total equipment purchase limit was raised to $2,890,000. This is an increase from the 2022 Section 179 tax deduction of $1,080,000 with a threshold of $2,700,000 in total purchases.**
Here’s how it helps your business:
Say you financed a 2023 F-250 Super Duty for $45,000 and use it for business 100% of the time. Section 179 would allow you to deduct the full $45,000, resulting in significant tax savings. The actual cash savings is $9,450 ($45,000 x 21% corporate tax), bringing the price of the $45,000 truck down to an effective cost of $35,550.
Be sure to talk to your tax advisor to determine the tax ramifications of acquiring equipment for your business. [Source: Beacon Funding]
For more information about Ford work vehicles and the advantages of Section 179 to your business, consult the Mullinax Ford commercial vehicles team.
* All prices, rates, and percentages are subject to change based on automobile, configuration, and qualifying factors. ** Please note that all tax savings are based on United States I.R.S. and can change without notification.
