Section 179 of the Internal Revenue Service (IRS) Tax Code allows businesses to benefit from tax write-offs when financing such purchases. You could possibly diminish your tax liability by a substantial amount.
This article will assist you in determining if your truck, SUV, or other vehicle qualifies for the 2023 Section 179 list. It will also clarify the deduction and depreciation limits for vehicles under Section 179, providing an example to guide you in calculating the deduction.
Section 179 is a part of the U.S. tax code that enables businesses to deduct from tax returns the entire purchase price of qualified depreciated assets in the year of purchase or financing (up to a specific limit).
If you purchase a new vehicle in 2023 and start using it immediately, you could deduct the entire cost from your business's taxable income when filing taxes in 2024. It's important to note that the full purchase price qualifies for the deduction, even though the vehicle will continue to be valuable in the coming years.
Suppose your business secures $50,000 in auto financing in 2023. In this case, you may be able to deduct $50,000 from your taxable income as of January 2024. Thus, your business will benefit from reduced tax liability in the current tax year instead of spreading the deduction over future tax years through asset capitalization and depreciation. This benefits:
Whether new or used, a business asset qualifies as long as it hasn't been owned by you before. Whether you buy it outright or lease/finance it, you can still qualify for the tax deduction.
The IRS categorizes vehicles eligible for the Section Tax 179 deduction into three main groups namely Heavy, Light, and Other. The deduction permissible for each group can vary, and the IRS may adjust it annually to accommodate inflation.
This pertains to any vehicle with a gross vehicle weight rating GVWR ranging from 6,000 pounds to 14,000 pounds. Various pickup trucks, full-size SUVs, and commercial vans fall under this segment.
These have a manufacturer's GVWR below 6,000 pounds. Examples are passenger cars, small utility trucks, and crossover SUVs.
This category is for vehicles weighing more than 14,000 pounds or those that have been modified for nonpersonal use.
If your business has one of these vehicles, it qualifies for Section 179 tax write-off:
For the qualifying models exceeding 6,000 pounds, eligibility is based on the gross vehicle weight and the stated application.
Click to browse these new and/or used vehicles.
Both new and used vehicles are eligible for a Section 179 deduction. It's important to note that the used vehicle must be considered 'new to you' to qualify.
To calculate the cost of a vehicle after tax, you need to get the sum of the first year:
Also, find out your cash savings through this formula:
Then, from the overall first-year deduction, deduct the cash savings to get the vehicle cost after tax, i.e.
Almost every business needs a vehicle that is prone to depreciation. Instead of deducting the value of your vehicle purchases over several years, you can take the whole depreciation and deduct it in one year.
For any further questions, reach out to the Georgia Department of Revenue at 404-417-2100 or contact us. Take full advantage and explore our range of vehicles tailored to meet your business needs!
