Section 179 Vehicles For 2024
Your guide to Section 179 business vehicle deductions and bonus depreciation in 2024.
Section 179 vehicles for 2024: Getting you on the road to big tax deductions.
Did you purchase or finance a new or used vehicle for your small business? If so, you might be able to get a nice tax benefit. The Section 179 tax deduction lets you deduct all or part of the cost of your vehicle in the first year you use it for business, so long as it qualifies for the Section 179 deduction.
Balboa Capital recommends that you speak to a business accountant or tax professional to determine if the business vehicle you want to purchase is eligible and how much of a deduction your business might qualify for.
Section 179 limits and information on the Balboa Capital website are for illustrative purposes only; the 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.
Types of vehicles that are eligible.
Before we begin, it is essential to know that the IRS occasionally issues updates, guidance, and new rules relating to Section 179. The vehicles that qualify for deduction might change, so use this information as an initial guide.
Generally speaking, the Section 179 tax deduction applies to passenger vehicles, heavy SUVs, trucks, and vans used at least 50% of the time for business-related purposes. So, for example, a pool cleaning business can deduct the purchase price of a new pickup truck used to get to and from customers’ homes, so long as the new pickup truck is used more than 50% for business purposes.
Small vehicles.
Millions of small businesses and solo business owners use small vehicles daily. These include passenger cars, crossovers, and small utility trucks. Last year, small vehicles that weigh under 6,000 pounds have a Section 179 deduction limit of $12,200 in the first year they are used1. Please note that the IRS has yet to announce the 2024 deduction limit for small vehicles as of January 2024.
The deduction allowance is reduced proportionately if the vehicle is not used 100% of the time for business. For example, if a florist purchases a van that is used 50% for business purposes, the limit is $6,100 ($12,200 x .50).
Heavy vehicles.
Heavy vehicles have a Section 179 deduction cap of $30,500 in 2024.2 Let us say you finance a $50,000 heavy SUV and use it 100% for your small business. You could deduct $30,500 under Section 179. A regular depreciation percentage applies sometimes, but only a tax professional can confirm this. For a business vehicle to qualify as “heavy,” it must weigh at least 6,001 pounds and no more than 14,000 pounds.3 Many SUVs, vans, and pickup trucks weigh over 6,001 pounds.
The gross vehicle weight rating (GVWR) is typically featured on the vehicle manufacturer’s label or in the vehicle information package. The GVWR is the maximum safe weight of the vehicle. In case you are wondering, the curb weight is the vehicle’s unloaded (empty) weight. The manufacturer’s label lists the make, model, features, GVWR, and more, and it is located on the inside of the driver’s side door on either a sticker or a thin metal badge.
Special rules.
When you speak to your accountant or tax professional about Section 179 for vehicles in 2024, they will probably tell you about some of the special rules in place. One such rule deals with income. First, your Section 179 deduction cannot exceed your annual net taxable income. Next, your vehicle cannot be used for transporting people or property for payment or hire.
If you purchase a new or used vehicle, it must be put into service, also referred to as “business use,” in the calendar year you buy it before December 31, 2024. You will need to provide proof that your vehicle was used for business when electing the Section 179 deduction. This will be helpful if your business ever has to deal with a tax audit.
Source:
1, 2, 3 – https://hoodcpas.com/understanding-tax-depreciation-rules-for-2023-and-2024-bonus-depreciation-section-179-explained
Helpful links for small business owners.
Section 179 calculator
Instantly see how much you might be able to deduct.
Section 179 vehicles infographic
A visual look at how Section 179 works with business vehicles.
Last-minute tax strategies
A must-read if the clock is ticking on this year’s tax deadline.
