List of Vehicles that Qualify for Section 179 in 2023 (2024)

Section 179 is a provision of the US tax code that allows businesses to deduct (i.e., write off) the purchase price of qualifying equipment, vehicles, and software in the year it was purchased, as opposed to depreciating it a little at a time over several years. This deduction is particularly impactful for small businesses, as it can help markedly reduce tax liability and improve cash flow. For more information, see IRS Publication 946.

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*Note: Heavy SUVs have a deduction cap of $28,900 for the 2023 tax year.

Qualification depends on factors such as stated use and gross vehicle weight (GVW) which could vary by trim package. Most vehicles have this information on a label inside the driver's side door. As always, consult your accountant or tax professional for specific vehicle eligibility.

Yes, assuming the model and GVWR qualify, both new and used vehicles are eligible for a Section 179 deduction. It is important to note that a used vehicle must be "new to you".

To claim a Section 179 deduction, you must purchase and put the vehicle into service between January 1 and December 31 of the calendar year.

Yes, you can finance a vehicle and still take the Section 179 deduction. This can be a great way to improve cash flow – you take the entire price as a deduction, but are only paying back a small portion of it this year.

Yes. In fact, financing a vehicle under your company's name can offer certain benefits, such as separating personal and business liabilities, and potentially enhancing the company's credit profile. However, most lenders do not offer this, and the few who do typically impose restrictions like blanket liens.

For 2023, the deduction limit is $1,160,000, with a total equipment spending cap of $2,890,000. The specific deduction amount for each vehicle depends on its total cost and the business use percentage (business use must be at least 50%). Keep in mind that the Section 179 deduction begins to phase out on a dollar-for-dollar basis once your total equipment purchases exceed the spending cap.

IRS guidelines divide all vehicle usage into three categories: business, commuting, and personal. Business use, which is deductible, includes traveling between job sites, transporting goods and equipment, and business-related travel away from the regular work location. Commuting and personal use are not deductible, and this remains true even if some “business activity” takes place in the vehicle during these times (such as having an advertising display on the vehicle, using the commute to listen to business books, phoning clients, or similar.) This means if you are bringing a vehicle home every night, it can never be 100% business use (as the commute is not deductible even if everything else is).

To calculate the business-use percentage, divide the total miles driven for business purposes by the total miles driven (including personal use / commuting) for the year. The business use percentage is then applied to the purchase price of the vehicle to determine the deductible amount for Section 179. Your accountant or tax professional should help you here.

Bonus depreciation allows businesses to claim an additional first-year depreciation deduction on eligible property, including some vehicles. For 2023, the bonus depreciation rate is 80%. Note that for heavy SUVs and any vehicle under 6,000 lbs GVWR, bonus depreciation is limited – please consult Additional First Year Depreciation Deduction or ask your accountant/tax professional (please note that Crest Capital cannot answer any tax or eligibility questions).

You’ll want to keep detailed records of your vehicle usage, including mileage logs, receipts, invoices, and any related expenses. These records will help you substantiate your business use claim if the IRS audits your tax return. Further, it is important to keep these records for at least three years after filing your tax return. For more information, consult the SBA Tax Guide.

As mentioned earlier, consider financing vehicles instead of purchasing them outright, which can improve cash flow and still allow for the Section 179 deduction.

Pro Tip: Finance eligible vehicles towards the end of the calendar year. This minimizes the number of monthly payments made on the vehicle, while still taking a deduction.

Depending on your state, it is possible there are state-specific rules and regulations that may apply to Section 179 deductions (some, but not all, states have their own guidelines regarding Section 179 deductions.) To verify eligibility and requirements, contact the Department of Revenue for your state and/or a tax professional familiar with your state's tax laws.

You purchase a new heavy SUV with a GVWR of 6,500 lbs. for $60,000, and it is used 80% for business purposes. The business-use portion of the vehicle cost is $48,000 (80% of $60,000). So you can claim the full $28,900 maximum allowed for SUVs as a Section 179 deduction. (note – this assumes all other criteria are met and you stay within Section 179’s total equipment spending limits).

Understanding the Section 179 deduction is crucial for small business owners looking to maximize their tax savings. Choose a vehicle that qualifies, keep accurate records for business use, consult with your tax professional, and stay updated on the latest tax laws to take full advantage of this valuable tax incentive.