One of the more popular uses of the Section 179 Deduction has been for vehicles. In fact, several years ago the Section 179 deduction was sometimes referred to as the “Hummer Tax Loophole,” because at the time it allowed businesses to buy large SUV’s and write them off. While this particular use (or abuse) of the tax code has been modified with the limits explained below, it is still true that Section 179 can be advantageous in buying vehicles for your business. Vehicles used in your businesses qualify – but certain passenger vehicles have a total deduction limitation of $11,160, while other vehicles that by their nature are not likely to be used more than a minimal amount for personal purposes qualify for full Section 179 deduction (full policy statement available at: IRS.gov: https://www.irs.gov/instructions/i4562#d0e3005).

Note: the deduction for business vehicles is the same whether they are purchased outright, leased, or financed with Section 179 Qualified Financing.

Note that because many vehicles can serve business and personal function both, the rules for business vehicle deductions are always evolving, and can be complicated. It’s easier to list the typical vehicles that will generally qualify for a full section 179 deduction, and then discuss the rules for other vehicles. Many “work vehicles” that, by their nature, are not likely to be used for personal purposes will usually always qualify for full Section 179 deduction. This includes the following vehicles:

For passenger vehicles, trucks, and vans (not meeting the guidelines below), that are used more than 50% in a qualified business use, the total deduction including both the Section 179 expense deduction as well as Bonus Depreciation is limited to $11,160 for cars and $11,560 for trucks and vans. Exceptions include the following vehicles:

Certain vehicles (with a gross vehicle weight rating above 6,000 lbs. but no more than 14,000 lbs.) qualify for deducting up to $25,000 if the vehicle is purchased and placed in service prior to December 31 and meets other conditions.

As stated earlier, the vagueness of business vs. personal use can be complicated. To help, please refer to page 6 of these Instructions for Form 2106 to read the exact IRS language. For complete IRS information on Depreciation and Amortization, see Instructions for Form 4562

Vehicles can be new or used (“new to you” is the key). The vehicle must be acquired in an “arms-length” transaction, financed with certain qualified leases and loans, and titled in the company name (not in the company owner’s name). The vehicle must also be used for business at least 50% of the time – and these depreciation limits are reduced by the corresponding % of personal use if the vehicle is used for business less than 100% of the time. 

Remember, you can only claim Section 179 in the tax year that the vehicle is “placed in service” – meaning when the vehicle is ready and available – even if you’re not using the vehicle. Further, a vehicle first used for personal purposes doesn’t qualify in a later year if its purpose changes to business.

As always, if you have questions, consult your tax professional for exact rules regarding Section 179 and vehicles.

#1: Buy local to support yourself

Studies show that when you buy from an independent, locally owned business, rather than a nationally owned business, significantly more of your money is used to make purchases from other local businesses, service providers and farms continuing to strengthen the economic base of the community.

#2: Be friendly to our environment

Locally owned businesses can make more local purchases requiring less transportation and generally set up shop in town or city centers as opposed to developing on the fringe. This generally means contributing less to sprawl, congestion, habitat loss and pollution.

#3: Support community groups

Non-profit organizations receive an average 250% more support from smaller business owners than they do from large businesses.

#4: Keep our community unique

Where we shop, where we eat and have fun – all of it makes our community home. Our one-of-a-kind businesses are an integral part of the distinctive character of this place. Our tourism businesses also benefit.

#5: Local businesses create more jobs

Small local businesses are the largest employer nationally and in our community, provide the most jobs to residents.

#6: Get better service

Local businesses often hire people with a better understanding of the products they are selling and take more time to get to know customers.

#7: Invest in your community

Local businesses are owned by people who live in this community, are less likely to leave, and are more invested in the community’s future.

#8: Put your taxes to good use

Local businesses require comparatively little infrastructure investment and make more efficient use of public services as compared to nationally owned stores entering the community. In addition, nationally owned businesses often demanding tax incentives.

#9: Encourage future investment

A growing body of economic research shows that in an increasingly homogenized world, entrepreneurs and skilled workers are more likely to invest and settle in communities that preserve their one-of-a-kind businesses and distinctive character.

#10: Competition leads to more choices

A marketplace of tens of thousands of small businesses is the best way to ensure innovation and low prices over the long-term. A multitude of small businesses, each selecting products based not on a national sales plan but on their own interests and the needs of their local customers, guarantees a much broader range of product choices.

Shopping local isn't just economical, it's ethical too! Your purchase MEANS MORE at a small business. Join us on Saturday November 30th, 2019 for our Small Business Saturday Spectacular! Free food, games, and fun for the whole family. Remember to #shopsmall and support #smallbizsat !