Section 179 Tax Code Updates

Section 179 Tax Code Updates

Section 179 of the IRS Tax Code is a small business tax incentive that allows business owners to fully expense a depreciable asset in the year of purchase rather than depreciating the asset over an extended period of time. Instead of capitalizing on the asset, business owners can lower their current-year tax liability while not depreciating the asset. This tax code was created to incentivize business owners to invest in their operations by purchasing vehicles, fleets, equipment, furniture, and machinery with less risk. Although this tax deduction has been around for years, recent updates from the Stimulus Acts and Congressional Tax Bills have led to more benefits for business owners to utilize. 

Here are some important changes to the Section 179 Tax Deduction for 2023:

The Section 179 deduction limit for 2023 was raised to $1,160,000 (previously $1,080,000 ), and the total equipment purchase limit was raised to $2,890,000 (previously $2,700,000).

2023 Spending Cap on equipment purchases = $4,050,000 (previously $3,780,000)

How Does a Vehicle Qualify for Section 179?

Before making any vehicle or equipment purchases for your business, it’s important to understand what qualifies a vehicle for the Section 179 tax deduction. Here are the most important requirements a vehicle must meet to qualify:

• Vehicle Weight. The vehicle must have a gross vehicle weight rating (GVWR) above 6,000 lbs. This qualifies most trucks, cargo vans, and other heavier vehicles. Be sure to check the GVWR before making any final decisions. 
• Vehicle Usage. The vehicle must be used for business purposes over 50% of the time to qualify for the Section 179 deduction. The vehicle must also be put into service by December 31st to qualify for the current tax year.

Although the Section 179 tax code is a federal tax code, some states have adjusted their tax codes in their own manner. Be sure to consult with a tax professional from your state to ensure you are making the right decision for the future of your business.

Things You Should Know About Section 179

Aside from the vehicle usage and GVWR, there are more specifics that a business owner should understand before starting their search. 

• The vehicle you purchase can be New or Used. It doesn’t matter if the vehicle is brand new or pre-owned. As long as the vehicle is “new to you” it will qualify for the Section 179 tax deduction.

• You can finance or lease the vehicle. Vehicles that are leased or financed through a bank or dealership still qualify for the Section 179 tax deduction.

• Put the vehicle into service by Dec. 31st. If you want to take advantage of Section 179 in the current tax year, the vehicle must be put to use before Dec. 31st.

If you have any questions about the specifics of Tax Code Section 179, we’d recommend consulting with a tax professional from your area.

Vehicle Deduction Limits

Depending on the body style and vehicle usage, your business may qualify for a partial or full deduction for your purchase. 

Sport utility vehicles (SUVs) have a deduction limit. Vehicles considered sport utility vehicles (SUV) that have been put into service before Dec. 31st have a maximum deduction of $28,900. This includes Pickup trucks with a full-size (8’) cargo bed and Heavy SUVs with a GVWR (Gross Vehicle Weight Rating) between 6,000 lbs and 14,000 lbs. Sport utility vehicle (SUV) is any 4-wheeled vehicle that is primarily designed or which can be used to carry passengers over public streets, roads, or highways (except any vehicle operated exclusively on a rail or rails). 

Work-centric vehicles, mainly used for business, such as shuttle vans, cargo vans with a fully-enclosed driver’s compartment/cargo area with no seating behind the driver’s seat, over-the-road Tractor Trailers, and “Singular use” business vehicles like ambulances or hearses qualify for the full deduction.

Vehicles that Qualify for Section 179 Tax Deduction

Bob Moore Auto Group offers a wide selection of vehicles that qualify for the Section 179 Tax Deduction. You’ll find plenty of options to choose from at our dealerships across the OKC metro area. Stop by to learn more about a specific model or schedule a test drive for a time that works for you. In the meantime, here’s a list of vehicles we carry that qualify for the tax deduction:

If you’re considering taking advantage of Section 179 to purchase a vehicle, we highly recommend consulting with a tax expert before making any decisions. Once you’ve decided to capitalize on this incentive, consider making Bob Moore Auto Group your dealer of choice this holiday season.