Potential Benefits of Section 179 of the US Tax Code to Help Your Bottom Line
What is Section 179?
Section 179 is the Internal Revenue Service tax code that permits a business owner to expense some or all of the cost of purchasing new or used work trucks or vans in the same year the vehicle was purchased.
The Tax Cuts and Jobs Act [of 2017] changed deductions, depreciation, expensing, tax credits and other tax items that impact businesses. Changes to deductions, depreciation and expensing may affect a taxpayer’s business taxes.
Why is this Helpful?
Rather than having to recover the cost of the asset through normal depreciation and tax deductions over several years and, depending on the total purchase dollar amount, the entire cost of the vehicle purchase could be offset against taxable income immediately, up to the annual maximum amount pursuant to Section 179.
How Big is the Opportunity?
Businesses may deduct the full cost of qualifying new and used equipment and most software from gross income – up to $ 1,080,000 – if purchased or leased and placed into service during 2022. Additionally, most businesses are allowed to deduct bonus depreciation for the full cost of new and used purchases and leases that exceed $1,080,000. For 2022, Section 179 benefits may be available for eligible purchases up to $2,700,000. *
The Right Timing
To qualify for the Section 179 deduction, the vehicle must be purchased, financed, or leased, and put into service by December 31, 2022. The business use for all such vehicles must also exceed 50%. If the vehicle is primarily for personal use, or only occasionally business use, then it would not be eligible.
Both new and used vehicles are eligible, with certain restrictions. including that they may not be acquired from a related party, such as family, another business you own, or trusts and charitable organizations with which the owner has a relationship/affiliation.
The First Step
Talk to an accountant, attorney or tax advisor. This is the most important initial step towards understanding the tax code, and the specific tax advantages that may be gained by purchasing new or used trucks or vans. Vehicle owners may qualify for the temporary increased bonus depreciation percentage up to 100% for qualified purchases acquired and placed in service after Sept. 27, 2017, and before Jan. 1, 2023. This allowance generally decreases by 20% per year in taxable years beginning after 2022 and expires on January 1, 2027.
The Right Solution
Your next step is to get with your favorite dealership and let them know about your business needs.
Questions to consider
- Do you plan to purchase or use a capital lease?
- What are your key goals?
- Are you struggling with truck maintenance, poor fuel economy, or have increased demands on your work trucks?
- Do you have an opportunity to grow your business by adding more trucks or vans?
Explain your goals to your commercial sales consultant and your dealer will likely have configuration suggestions that could maximize the efficiencies of your trucks.
Now is the time to take advantage of Section 179. To help you prepare for conversations at the dealership, visit the Discover & Learn section on www.Comvoy.com. Click here to research your perfect vehicle for today’s job and help position your business for future growth.
Sponsored by Mitsubishi HC Capital America, Inc.
*Mitsubishi HC Capital America, Inc. does not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transactions.
Disclaimer: The views expressed here are solely those of the author in their private capacity and do not in any way represent the views of the Comvoy.com, or any other entity of Work Truck Solutions.Published on: October 19, 2022