Small business owners, take heed: a very useful tax break that you may or may not be aware of is expiring at the end of this year. Currently, Section 179 of the United States tax code allows you to write off the purchase of large vehicles and SUVs. The cost of these purchases can be deducted from your income tax if you choose, instead of mandating that the cost of the property be capitalized and depreciated.
There are certain stipulations for the vehicles to qualify however.
– To receive the highest possible deduction the gross vehicle weight must be between 6,000 and 14,000 lbs. Vehicles weighing less than 6,000 lbs can still qualify for deductions up to $11,000.
– Vehicles must be used primarily to conduct trade or business (greater than 50% of total usage). Depreciation limits are reduced for the equivalent percentage for vehicles used in business less than 100% of their total usage.
– The total deduction for passenger vehicles, trucks, and vans cannot exceed $11,160 for cars and $11,360 for trucks and vans.
- Exceptions to this rule include ambulances, hearses, taxis, transport vans, and qualified non-personal use vehicles specifically modified for business
– Vehicles that qualify for the full Section 179 deduction by their nature include:
- Heavy “non-SUV” vehicles with a cargo area at least six feet in interior length (not easily accessible from passenger area)
- Vehicles that seat nine-plus passengers behind the driver’s seat (e.g. shuttles/passenger vans)
- Vehicles with a fully-enclosed driver’s compartment/cargo area, no seating at all behind the driver’s seat, and no body section protruding more than 30 inches ahead of the leading edge of the windshield
– Vehicles qualify so long as they are new to you, i.e. they can be purchased new or pre-owned.
The maximum deduction an individual can claim under Section 179 in a year is currently $500,000. In 2014, that maximum deduction drops to $25,000. Act now and don’t miss your chance to save.
For further reading, we recommend visiting section179.org and the IRS instructions for Form 2106 (the form used to claim Section 179 deductions).
We highly recommend speaking to whoever does your taxes if you have more questions. If you have questions about the vehicles themselves, you can leave us a comment, email us at comments@leithmail.com, or contact us at Leith Lincoln.