Vehicle Tax Deductions (Writing off a Vehicle for business Using Section 179 Depreciation)

Vehicle Tax Deductions (Writing off a Vehicle for business Using Section 179 Depreciation)

Time stamps so you can jump to any point in the video at any time.

0:53 When does 179 apply for vehicles?
1:51 Determining business use for personal use
3:03 Why Gross Vehicle Weight Matters
4:00 Example of how section 179 works
5:07 What is Section 280-F?
9:39 Vehicle weight ranges for tax deductions
11:40 When no section 179 limits apply

Free downloadable Handout and More: https://www.dropbox.com/s/xicffrcy2s8...

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Section 179 Explained:    • What is Section 179? (How Does Section 179...  

Where to find more information on depreciation?

Publication 946 is your friend: https://www.irs.gov/pub/irs-prior/p94...

Publication 463: https://www.irs.gov/pub/irs-pdf/p463.pdf


When does a vehicle qualify for the section 179 deduction?

Section 179 deduction is only available if the vehicle is used more than 50% of the time for business use in the year it is placed in service. In order to qualify to take 179 you need to be using the vehicle for business more than 50% of the time in the same year you purchase it. If you are ineligible to take 179 due to less than 50% business use you must depreciate the vehicle using the straight line depreciation method over 5 years.

How is vehicle business use determined?

Business vehicle use percentage can be determined by dividing business/investment miles driven during the year by the total miles driven. In other words…. of your total miles driven for the year how many of those miles were personal miles vs. business miles. From this example you can see that is crucial to keep good mileage records for each year to the best of your ability.

Are there limits for how much 179 expense you can deduct on the vehicle?

Remember the section 179 limits are per vehicle up to the maximum annual limit which I believe sits at $2,500,000.

How does section 179 affect the cost basis of the vehicle for depreciation purposes?

Section 179 first reduces the cost basis of the vehicle and then normal macrs depreciation begins on the amount remaining.


How vehicle weight impacts section 179 (Exceptions to Section 280F Limits)

The charts and depreciation limits we just discussed applied to vehicles of 6,000 lbs or less. As vehicle weight increases above 6,000 lbs we are going to be able to take a larger amount of section 179 expense on the vehicle and no regular depreciation limits apply. Using the internet you can easily look up the gross vehicle weight of a particular vehicle model.

• Cars with gross vehicle weight (when unloaded) above 6,000 lbs but less than 14,000 lbs are allowed a section 179 deduction of up to $25,000 that can be taken in the first year. On top of that, normal depreciation will calculate on the remaining basis of the vehicle.
• Truck or van with a gross vehicle weight (when loaded) above 6,000 lbs but less than 14,000 lbs are allowed a section 179 deduction of up to $25,000 that can be taken in the first year. On top of that, normal depreciation will calculate on the remaining basis of the vehicle.

When maximum section 179 applied to automobile (Section 179 in excess of $25,000 up to maximum annual limit)
In a few instances no section 179 limit applies. These rules apply to the follow vehicles

• A vehicle that is designed to seat more than nine passengers behind the driver. An example would be a hotel shuttle van.
• A vehicle that has an open cargo area or covered box that is at least six feet long and not readily accessible from the passenger compartment. An example would be a pick-up with a full size cargo bed.
• A vehicle that has an integral enclosure fully enclosing the driver compartment and load carrying device, do not have seating behind the driver’s seat and have no body section protruding more than 30 inches ahead of the windshield. An example would be delivery van.
Depreciation recapture

If at some point your business use of the vehicle drops to 50% or less than excess depreciation deductions must be recaptured and reported as ordinary income, thus raising your overall tax liability.
What is listed property related to vehicles?

• Passenger automobiles (as defined later).
• Any other property used for transportation, unless it is an excepted vehicle.

Passenger Automobiles A passenger automobile is any four-wheeled vehicle made primarily for use on public streets, roads, and highways and rated at 6,000 pounds or less of unloaded gross vehicle weight (6,000 pounds or less of gross vehicle weight for trucks and vans). It includes any part, component, or other item physically attached to the automobile at the time of purchase or usually included in the purchase price of an automobile. The following vehicles are not considered passenger automobiles for these purposes.