Updated: February 7, 2019
You can take a mileage deduction by tracking your drives with a mileage tracker. Or you can take a depreciation deduction if you use the actual expense method. There are strict limits to this if you have a “passenger automobile.”
Yet, business vehicles like trucks, vans or SUVs can qualify for a larger write-off. Let’s go over Section 179 vehicles deductions. We’ll also dive into the deduction limits.
What is the Section 179 deduction?
The Section 179 deduction allows small business owners and the self-employed to deduct the full price of certain equipment. This can include machinery, office furniture, software and even heavy vehicles.
Expansion of Section 179 property include the following improvements applied to nonresidential real property after the date when the property first went into service:
- Qualified improvement property or any improvement to a building’s interior. However, improvements do not qualify if they are attributable to:
- the enlargement of the building,
- any elevator or escalator or
- the internal structural framework of the building.
- Fire protection systems, alarm systems, security systems, HVAC, and roofs.
These changes apply to property placed in service in taxable years beginning after Dec. 31, 2017.
Section 179 changes with the new tax law
The new tax law just passed has greatly expanded the bonus depreciation for Section 179 Vehicles. The major changes include:
- Bonus depreciation amount is 100 percent for assets placed in service after Sept. 27, 2017, and before Jan. 1, 2023
- The new law now applies to used equipment and select improvements made to nonresidential real property
- The deduction limit increases from $500,000 to $1 million
- Phase-out threshold increases from $2 million to $2.5 million.
It’s important to realize that adjustments for inflation apply to these threshold amounts of $1 million and $2.5 million for taxable years beginning after 2018.
What Section 179 vehicles qualify for the full deduction?
Vehicles that weigh more than 6,000 pounds but less than 14,000 pounds qualify for the Section 179 deduction.
That weight limitation applies to your business truck, van or vehicle with a truck base (like most SUVs). The unloaded weight is the vehicle’s weight without any passengers or cargo.
Trucks that weigh 14,000 pounds or less fully loaded are subject to the same rules as passenger automobiles unless the vehicle is not likely to be used for personal purposes. In that case, the vehicles are not considered passenger automobiles and the limitations on depreciation don’t apply.
SUVs, trucks, vans, and other vehicles that don’t qualify as passenger automobiles are not subject to the IRS limits and can take a full depreciation deduction each year. Using bonus depreciation and/or Section 179, you may be able to deduct all or most of the cost of such a vehicle in a single year.
This is a potentially enormous deduction for business people who purchase heavy SUVs and similar vehicles for their business.
Section 179 vehicles deduction for 2018 tax year and beyond
The new rules under the Tax Cuts and Jobs Act has a major impact on the write-off you can take for Section 179 vehicles. It changed the depreciation limits for vehicles placed in service after Dec. 31, 2017.
Here’s the limit you can claim for depreciation if you haven’t claimed bonus depreciation.
|Year Placed in Service||Depreciation Deduction|
|Each Taxable Year After||$5,760|
Section 179 vehicle deduction limits for 2018 with bonus depreciation
If you’ve claim 100 percent bonus depreciation, your deduction limits are:
|Year Placed In Service||Depreciation Limit w/Bonus|
|Each Year After||$5,760|
Temporary bonus depreciation for Section 179 vehicles
The new tax law increased the bonus percentage from 50 percent to 100 percent for qualified property. This property must be acquired and placed in service after Sept. 27, 2017, and before Jan. 1, 2023. Property purchased before Sept. 28, 2017, and placed in service before Jan. 1, 2018 is eligible for the old 50 percent bonus depreciation.
How to qualify for the Section 179 deduction
To qualify for the Section 179 vehicle deduction and bonus depreciation, you must use it for business more than 50 percent of the time. This is true for the full five-year depreciation period that applies to vehicles.
If your use dips below 50 percent during any of that five-year period, you’ll have to repay your deduction and bonus depreciation. That’s why it’s vital to track your business mileage, no matter what method you’re using to take a deduction.
List of Section 179 vehicles
You’ll find a list of Section 179 vehicles below. These are vehicles with a loaded weight of over 6,000 pounds.
As can be seen, this an exhaustive list. You can consult a car manufacturer’s website to see how much a vehicle weighs.
|Audi||Audit Q7 3.0T Premium||6479|
|Land Rover||Range Rover||7033|
|Ram||ProMaster 1500 Cargo||8550|
|Ram||ProMaster 2500 Cargo||8900|
|Ram||ProMaster 3500 Cargo||9350|
MileIQ’s blog does not constitute professional tax advice. You should contact your own tax professional to discuss your situation.