Section 179 - Tax Savings When you Reinvest into Your Business
Investing back into your business is always a good idea, and the IRS is giving you the chance to do so and save big! Tax advantages are a huge part of running a successful business, and Section 179 is helping businesses buy new work trucks and get immediate tax benefits. We go over why now is a great time to take advantage of Section 179 in this article.
Great Opportunity for Work Truck and Van Buyers
Internal Revenue Code Section 179 permits you to expense some or all the cost from purchasing new or used work trucks or vans (a capital asset) in the same year you buy. Before Section 179, deducting the asset would be over several years. Depending on the total dollar amount, the vehicle’s entire cost could be offset against taxable income immediately, up to the annual maximum amount. This is a great opportunity because you don’t have to purchase a new work vehicle outright, and you can still deduct the FULL PURCHASE PRICE for that tax year.
How Big is the Opportunity?
Last year Congress finally made Section 179 permanent, and they set the limit at $1,000,000 for 2020 and beyond. This is wonderful news for all small and medium businesses. Knowing early in the year that the deduction will be there for you at the end of the year allows you to plan your tax strategy. Especially this year - since COVID turned our lives and businesses inside out – now is the perfect time to assess what is best for your business going into 2021. Is there more opportunity for your current business? Is there a new direction that has opened due to the pandemic changes? Is this the time to grow, or do you need to protect your business by replacing an old, unreliable vehicle? These are worthy thoughts.
The Right Timing
To qualify for the Section 179 deduction, buy any work vehicle, financed or leased, and put into service by December 31st of this year. Required business usage of vehicles is 50%; vehicles used mainly for personal use and only occasionally for the business aren’t eligible.
New and used vehicles are eligible, and vehicles can't be acquired from a related party, such as family, another business you own, trusts, and charitable organizations with which you have a relationship/affiliation.
Soon, you will see emails and flyers from dealerships reminding you about Section 179. Be sure that you get started, so your vehicle purchases are completed and in-service before the year-end.
The First Step
Talking to your accountant or tax advisor is the most crucial initial step towards understanding the specific tax advantages that you would gain if purchasing new or used trucks or vans for your business’ situation. Since the law may also have increased the bonus depreciation percentage from 50 percent to 100 percent for qualified purchases acquired and placed in service after Sept. 27, 2017, before Jan. 1, 2023, they can consider your entire purchase strategy.
The Right Solution
Your next step is to get with your favorite dealership and let them know all about your business needs and whether you plan to purchase or to use a capital lease. What are your key goals? Are you struggling with truck maintenance, poor fuel economy, or just an unsightly truck? Do you have an opportunity to grow your business by adding a truck or van? Explain your goals to your Commercial Sales Consultant and your dealer will likely have configuration suggestions that could maximize your efficiencies. Your dealer can also help you with a new work truck or van that will provide years of trouble-free operation with warranties and maintenance wrapped around the purchase. Right now, in the fourth quarter of 2020, many auto manufacturers have programs with low-interest rates, including special offers for upfits; and YES, even some structured leases, will qualify you for Section 179.
Now is the perfect time to take advantage of Section 179. Be strategic, invest time to figure out how to help yourself, prepare for success, and to prevent unexpected road bumps. Educate yourself for smart conversations with your dealership; ‘Learn’ on Comvoy.com where you can research your perfect vehicle for today’s job and help position you for future growth.
Sponsored by Work Truck Finance, Hitachi Capital America
Published on: October 21, 2020