Section 179 Tax Deduction

What is the Section 179 Tax Deduction?

Section 179 is a part of the US tax code. This provision allows businesses to write off (aka deduct) the full purchase price of qualifying vehicles in the year of purchase, rather than depreciating them a little at a time over several years. For businesses considering the purchase of an SUV or passenger vehicle, this deduction can significantly reduce tax liability and improve cash flow.

The basic understanding is that Section 179 of the tax code allows business taxpayers to deduct the cost of a specific property as an expense when it is first placed in service. That property or equipment, such as a vehicle with a gross vehicle weight rating (GVWR) of over 6,000 lbs but no more than 14,000 lbs, is eligible, such as the Volkswagen Atlas V6 4Motion.

The gross vehicle weight rating (GVWR) is the maximum weight a vehicle—including its occupants, cargo, fuel, and trailer tongue weight—can legally and safely weigh. Often referred to simply as gross weight, GVWR is distinct from unladen weight, gross combined weight rating, towing weight rating, and registered weight rating. Typically, the original GVWR label can be located on the door jamb or inside the door.

Keep in Mind:

  • Fully electric vehicles have lower deduction limits.
  • Deductions can only be made on vehicles placed “in service,” meaning actively used for business in that year.
  • Tax rules can change from year to year.

Section 179 expensing method is offered as an incentive for small business owners to grow their businesses with the purchase of new equipment.

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Quick Facts:

  • The vehicle must be used for business purposes more than 50% of the time, and the purchase must be completed and the vehicle put into service within the current tax year.
  • Financed and leased vehicles qualify, provided they meet the eligibility requirements and are used predominantly for business purposes.
  • New and Pre-Owned vehicles can qualify for the Section 179 Deduction as long as they fit the guidelines and usage is at least 50% for business purposes.
  • Under Section 179, you can deduct up to the full purchase price of a qualifying vehicle, subject to the limits of your business’s total qualifying expenses and vehicle usage. However, you should seek counsel from your tax professional to understand your limits.

[1] The information provided regarding Section 179 tax deductions is intended for general informational purposes only. Tax laws are subject to change, and individual circumstances may vary. Section 179 limits and information provided are subject to change by the IRS. Please visit the IRS website or consult a qualified tax professional for confirmation of the current Section 179 limits and information related to your situation. IRS Publication 946.