What is it?
Section 179 of the U.S. internal revenue code is an immediate expense deduction that business owners can take for purchases of depreciable business equipment instead of capitalizing and depreciating the asset over a period of time.
This allows businesses to lower their current-year tax liability rather than capitalizing an asset and depreciating it over time in future tax years.
What if I finance the asset?
The Section 179 deduction can be taken if the piece of equipment is purchased or financed and the full amount of the purchase price is eligible for the deduction as long as it is within the tax year.
What assets can I depreciate?
Section 179 expense deduction is limited to such items as cars, office equipment, business machinery, and computers.
What if I don’t use the asset until next year?
The property must be placed in service during the tax year for which the deduction is being claimed. Equipment covered by the Section 179 deduction might also qualify for bonus depreciation, which further reduces the business owner’s tax bill.
Is there a limit on the deduction?
The maximum amount you can elect to deduct for most section 179 property you placed in service in tax years beginning in 2021 is $1,050,000, according to the Internal Revenue Service (IRS), which also limits to the total amount of the equipment purchased to a maximum of $2,620,000 in order to qualify.
Can I depreciate personal assets using the Section 179 Deduction?
Equipment, vehicles, and/or software purchased under Section 179 must be used for business purposes more than 50% of the time to qualify for the deduction. Simply multiply the cost of the equipment, vehicle(s), and/or software by the percentage of business-use to arrive at the monetary amount eligible for Section 179.
What if the asset isn’t under my business’ name?
Ideally the asset that is being depreciated should be under the business’s name. However it is very rare that the IRS will inspect this information unless there is an audit of your business.
Does the State allow the same deduction?
This varies on a state-to-state basis. In California the deduction allowed is limited to $25,000. Therefore, if you have an asset that you are deducting on the federal for $75,000, the deduction will still be $25,000.
Can I use this depreciation again in the future on the same asset?
No, once it is used, the depreciation is used in full and can’t be used again.
Can I use this depreciation again in the future on a different asset?
Yes, as of 2021 you can still use the depreciation on a different asset.
Can I use this depreciation on a car?
This varied based on the type of car and business activity associated with it.
The list of vehicles that can get a Section 179 Tax Write-Off include:
• Heavy SUV’s, Pickups, and Vans that are more than 50% business-use and exceed 6000 lbs. gross vehicle weight can qualify for at least a partial Section 179 deduction, plus bonus depreciation.
• Obvious “work” vehicles that have no potential for personal use typically qualify.
• Delivery type vehicles, like a classic cargo van or box truck with no passenger seating, can qualify.
• Specialty “singular-use” vehicles generally qualify – a hearse, an ambulance, etc.
To meet the weight criteria, the manufacturer’s gross vehicle weight rating (GVWR) must exceed 6,000 lbs. You can verify the GVWR of a particular vehicle by checking the manufacturer’s label that’s normally located on the inside edge of the driver’s side door where the door hinges meet the vehicle’s frame.
Here’s a partial list of SUVs and Trucks that might qualify for a tax deduction.
- Audi Q7
- BMW X5, X6
- Buick Enclave
- Cadillac XT5, XT6, Escalade
- Chevrolet Silverado, Suburban, Tahoe, Traverse
- Chrysler Pacifica
- Dodge Durango, Grand Caravan
- Ford Expedition, Explorer, F-150 and larger
- GMC Acadia, Sierra, Yukon
- Honda Pilot 4WD, Odyssey
- Infiniti QX80, QX56
- Jeep Grand Cherokee
- Land Rover Range Rover, Discovery
- Lexus GX460, LX570
- Lincoln MKT AWD, Navigator
- Mercedes-Benz G550, GLS, GLE, Metris, Sprinter
- Nissan Armada, NV 1500, NVP 3500, Titan
- Porsche Cayenne
- Tesla Model X
- Toyota 4Runner, Landcruiser, Sequoia, Tundra
Can Both New and Used Vehicles Qualify for Section 179?
As with all Section 179 deductions, the vehicle must be new, or new to you. So yes, used vehicles will qualify, along with brand new.