Thanks to the guidelines under IRS Section 179 of the IRS tax code, many small businesses that invest in new equipment can write off up to $1 MILLION worth of these purchases on their 2019 IRS tax returns.* Normally, small businesses spread these deductions over several years. But, the tax benefits provided under IRS Section 179 allow many small businesses to write off up to $1 MILLION of qualifying new equipment in the first year it is placed in service.* The full cost of the vehicle may only be deducted on trucks, vans and SUVs with a GVWR greater than 6,000.
The qualifying vehicle must be purchased and placed into service by midnight December 31, 2019. It must be used at least 50% for business, based on mileage, in the first year it is placed in service. So if you choose to use it for both personal and business use, the cost eligible for deduction would be the percentage used for business.
Please note that the maximum IRS Section 179 Deduction of $1 MILLION allowable is reduced if the Company purchases and/or finances more than $2,500,000 in business equipment during tax year 2019.
* This analysis applies only to vehicles placed in service in the United States after December 31, 2017 and by December 31, 2018 with no written binding contract for acquisition in effect before January 1, 2018. The aggregate deduction of $1,000,000 available under Internal Revenue Code Section 179 is most beneficial to small businesses that place in service less than $2,500,000 of “Section 179 property” during the year (vehicles and other business property). The full cost of the vehicle may only be deducted on trucks, vans and SUVs with a GVWR greater than 6,000 lbs. and a bed length of at least six feet. The deduction available in the year of purchase on vehicles under 6,000 lbs. GVWR is set by The Tax Cuts and Jobs Act. IRC Section 280F(d)(7)(B) requires that the limitation under IRC Section 280F(a)(1) be adjusted annually, based on the CPI automobile component for October of the preceding year. The IRS officially announced the Section 280F depreciation limits in Revenue Procedure 2017-29. The limitation for first year depreciation on passenger automobiles under 6,000 lbs. GVWR is $18,000 and the limitation for first year depreciation for trucks/vans under 6,000 lbs. GVWR is $18,000. The remaining cost of the automobile, truck or van is depreciated under regular MACRS methods. SUV’s over 6,000 lbs. GVWR and trucks with a bed length of less than six feet over 6,000 lbs. GVWR are limited to a deduction of $25,000 in the year of purchase under Section 179(b)(5) with the remaining basis in the vehicle depreciated under normal MACRS methods. The expensing restrictions under Section 280F do not apply to vehicles that are considered to be “qualified non-personal use vehicles” (QNUV’s). A QNUV is generally a vehicle that, by virtue of its nature or design, is not likely to be used more than a de minimis amount for personal purposes. For more information, see income tax Reg. Sec. 1.280F-6(c)(3)(iii), Income tax Reg. Sec. 1.274-5T(k), and Revenue Ruling 86-97, and contact your tax advisor for details. Consult your tax advisor as to the proper tax treatment of all business-vehicle purchases.