Section 179 Business Vehicle Tax Deduction Guide

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Tax Code Section 179, the special deduction to write off equipment in the year purchased, was extended permanently in 2015 legislation.

Tax Code Section 179

This special deduction allows businesses to write off up to $500,000 worth of depreciable assets in the year that they are purchased.  This can include machinery, heavy equipment, furniture and fixtures, and certain vehicles, mainly SUVs and pickup trucks. 

There are certain limitations to the rule in addition to the $500,000 cap.  For example, if you purchase more than $2,000,000 in assets for the year, then you will have this deduction phased out.  Also, you have to have positive income and not a net loss for the year. However, if you meet these guidelines, then it can be a great idea to move those vehicle purchases you are planning for next year forward to 2017 to take advantage of last-minute tax savings.  You must purchase the vehicle by December 31, 2017, to get the write-off on your 2017 taxes.

Bonus Depreciation

For businesses that do not qualify for Section 179, there is another great tax break, but it expires in 2019.  Bonus Depreciation allows you to deduct 50% of the cost of assets in the year of purchase.  This deduction is allowed even if you do NOT have income and has no max amount.  You can use this for an unlimited number of purchases, but the deduction is only allowed for NEW assets.  For used vehicles, this deduction is not allowed, but Section 179 IS allowed.  The bonus depreciation deduction will be available at the 50% amount 2017.  In 2018 it will drop to 40% and in 2019 it will drop to 30%.

Limitations

Keep in mind that vehicles are subject to limitations on any of the depreciation deductions.  The vehicle must be used at least 50% for business to qualify.  Also, there are top end deductions for different classes of vehicles.  For example, small cars under 6,000 lbs. are capped at $11,060 of depreciation in the first year.  SUVs and crossovers with Gross Weight above 6,000-pounds are capped at $25,000, and pickups and vans with no rear passenger seating that are above 6,000-pounds do not have a cap. Every major brand of pickup (1/2 ton and up) are over 6,000-pounds for purposes of this deduction.  This includes Ford, Ram, Chevrolet, Toyota, GMC, and Nissan.  When you get down to the mid-sized trucks you might be surprised to find that some of these are right on the line.  A 2017 Chevrolet Colorado crew cab is over the weight limit, but the extended cab is not, so it might save enough in taxes to make it worthwhile to upgrade to the bigger size.

Mileage

Another great automobile deduction that is often overlooked is the mileage deduction.  This is a unique deduction because it does not matter how much you actually spend, but matters how much you drive.  This is the deduction you use if you are not depreciating the cost of your vehicle.  This would be used when mileage is a better deduction than depreciation, or when depreciation is not allowed (for example if you used your vehicle less than 50% for business).

The mileage rate is 54.0 cents per mile for the 2017 tax year.  The calculation is as simple as it sounds: if you drove 10,000 miles for business purposes, then you get a mileage expense of $5,400.

This deduction is much easier than keeping track of your expenses for gasoline, oil changes, tire replacement, etc.  Keep in mind, however, that you cannot double dip and use the mileage deduction in addition to expensing your gasoline, oil changes, tire replacement, etc.

Which Vehicles Qualify

Here is a quick reference to some vehicles that are over 6,000-pounds.  There may be others not listed here, and I also highly recommend you look on the inside of the driver’s door to verify the Gross Vehicle Weight Rating, sometimes equipment and options push a vehicle over the limit to qualify, and conversely a lack of options can keep a vehicle from qualifying, so do your homework!

ELIGIBLE 2017-2018 Vehicles:

  • Audi Q7 3.0L TDI
  • BMW X5 XDRIVE35I
  • BMW X6 XDRIVE35I
  • Buick ENCLAVE
  • Cadillac ESCALADE
  • Chevrolet Truck SILVERADO (from 1500 up)
  • Chevrolet Truck SUBURBAN
  • Chevrolet Truck TAHOE 4WD
  • Chevrolet Truck TRAVERSE 4WD
  • Chevrolet Express 2500 & 3500
  • Dodge Truck DURANGO 4WD
  • Dodge Caravan
  • Ford Truck EXPEDITION
  • Ford Truck EXPLORER
  • Ford Truck F-series (F-150 & up)
  • Ford Truck FLEX
  • GMC ACADIA
  • GMC SIERRA (1500 & up)
  • GMC YUKON
  • GMC YUKON XL
  • Honda Pilot
  • Honda Odyssey
  • Infiniti QX80
  • Jeep GRAND CHEROKEE
  • Land Rover RANGE ROVER
  • Land Rover RANGE ROVER SPT
  • Lexus GX460
  • Lexus LX570
  • Lincoln Navigator
  • Mercedes Benz G-Class
  • Mercedes Benz GL-Class
  • Mercedes Metris
  • Mercedes Sprinter
  • Nissan ARMADA
  • Nissan NV 1500 S V6
  • Nissan NV (1500-3500)
  • Nissan TITAN
  • Porsche CAYENNE
  • Ram ProMaster (1500-3500)
  • Ram Truck (1500-3500)
  • Toyota 4RUNNEr
  • Toyota LANDCRUISER
  • Toyota SEQUOIA
  • Toyota TUNDRA

While we always try to make sure our information is accurate as is the list of eligible vehicles, it is impossible to ensure this info is 100% correct.  Check with your dealer AND your CPA to make sure everything is right before taking this deduction.

Special thanks to an awesome CPA, Bill Caton of Caton Consulting Group.  If you or your business needs an outstanding CPA firm, contact bill at www.ccgcpa.com

Photo Credit: welcomia/Shutterstock

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4 Comments
  1. Jocel Alcedo 7 months ago

    Great tips here. I am in the market for a used or preowned 7 seater crossover or station wagon probably around the 2010 plus year model. I find most of these cars have 100K-150K mileage in them although purchase price of these cars are under the $10k-$12k price.

    Question:

    Do you recommend I buy cars with this much mileage at such purchase price offerings? I’m afraid if I did I may have to spend more later in the next 2-3 years of use specially if I will be using it for doing Lyft/Uber here in LA.

    Look forward to your reply. Thanks

    • Amy Plemons 7 months ago

      Good to hear from you! It really depends on the specific vehicle, it’s past history, etc. The safest bet over 100,000 miles is generally a Honda or Toyota, so keep that in mind. I hope you are able to find something that works.

      Jerry Reynolds
      Car Pro Radio Network

  2. Lisa Hesse 7 months ago

    We are in the market for a used Mini Van in year range of (2014-2016) and preferably a Chrysler Town and Country. I believe 2016 Weight limit I believe is 6050 lbs. and the one I am looking at includes the gas/ E85 Ethanol Flex Fuel option.
    My Question is : Would this 2016 qualify for the Section 179 deduction? What feedback can you give about this flex fuel option?

    Thank you for your feedback.

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