Section 179 Deduction Rules

For business owners looking to maximize their tax savings, the Section 179 deduction provides a significant opportunity. This deduction allows eligible taxpayers to deduct business assets, including vehicles both new and “new to you” used, in the year they are placed into service rather than depreciating them over time. Understanding the qualifications and rules for the Section 179 deduction can help you take full advantage of its benefits.

To qualify for the vehicle deduction under Section 179, at least 50% of the vehicle’s use must be for business purposes and there are strict guidelines on which types of vehicles are eligible. The deduction covers cars, SUVs, trucks and other vehicles, but the rules differ based on their weight, use and purchase price.

It’s all about the weight

The weight of a vehicle is important for determining Section 179 eligibility. Specifically, vehicles weighing over 6,000 pounds gross vehicle weight rating (GVWR) like SUVs, commercial vans and pickup trucks, often qualify for larger deductions as they are necessary for certain business operations. However, the vehicle must still meet the business use requirement and partial deductions may apply if the vehicle is not exclusively used for business. 

IRS requirements and limitations include:

Light Vehicles

  • Any vehicle with a manufacturer’s GVWR under 6,000 pounds.
  • This includes many passenger cars, crossover SUVs and small utility trucks.
  • Tax deduction limit of $12,400 in the first year of use.
  • An additional bonus depreciation of up to $8,000 may apply, bringing the total deduction to $20,400.

Heavy Vehicles

  • Any vehicle with at least 6,000 pounds GVWR but no more than 14,000 pounds.
  • This includes many full-size SUVs, commercial vans and pickup trucks. 
  • Tax deduction limit of $30,500, with a bonus depreciation of 40%.

Other Vehicles

  • Any vehicle with a GVWR over 14,000 pounds or a vehicle modified for nonpersonal use. 
  • Shuttle vehicles having more than nine passengers.
  • Delivery vans with an interior cargo area of at least six feet that is not easily accessible from the passenger area. 
  • Classic cargo vans with a fully enclosed driver compartment, no rear seating and a body that doesn’t extend more than 30 inches past the windshield.  
  • “Single-use vehicles” like ambulances, work trucks, hearses, etc. 
  • Up to 100% deductible. 

Why you should talk to your accountant

When navigating Section 179, working with your accountant or a tax professional is essential. They can determine which cars qualify for Section 179 based on weight, use and state-specific considerations. For instance, in California, there may be additional restrictions or nuances to consider when applying the deduction. Working with accounting consulting services can help you stay compliant with tax laws while optimizing your savings.

Section 179 is more beneficial to businesses than ever. It can provide substantial savings for business owners, particularly those who rely on heavier vehicles like SUVs and commercial trucks. By understanding the weight requirements and consulting with the right professional, you can make the most of this valuable tax incentive.