In a nutshell, Section 179 of the IRS tax code allows businesses to deduct the full purchase price of qualifying equipment and/or software purchased or financed during the tax year. That means that if you buy or lease a piece of qualifying equipment (such as an Isuzu Truck from Liberty Isuzu), you can deduct the full purchase price from your gross income. Basically, Section 179 is an incentive to encourage businesses to buy equipment and invest in themselves.
One of the more popular uses of the Section 179 Deduction has been for vehicles. In fact, the Section 179 deduction was sometimes referred to as the “Hummer Tax Loophole” because 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, Section 179 still can be very advantageous for buying and upfitting Isuzu Trucks for your business.
Section 179 does come with limits, as there are caps to the total amount that can be written off ($1,160,000 for 2023), and limits to the total amount of the equipment purchased ($4,050,000 in 2023).
With the Section 179 deduction, you can write off the entire purchase price of qualifying equipment up to the deduction limit. In previous years, qualifying equipment was expanded to include both new and used equipment. This definition of qualifying property remains in effect for 2023.
There are a few key factors that need to be considered when determining Section 179 qualifications. First and foremost, the vehicle must be used for business at least 50% of the time – and these depreciation limits are reduced by the corresponding percentage of personal use if the vehicle is used for business less than 100% of the time. Granted, Isuzu Trucks are designed for business use, so these exclusions may not apply towards your Isuzu Truck purchase, but it’s something to keep in mind.
In addition, the vehicle(s) you are purchasing must be titled in the company name. Simply titling the vehicle in the business owner’s name does not qualify for Section 179 deductions.
Regardless of whether you are purchasing/upfitting an Isuzu Truck or another type of vehicle, you must buy and put it into service between 1/1 and 12/31 of the calendar year you are claiming the write-off. “Placing the vehicle into service” means when the vehicle is ready and available – even if you’re not using it. Further, a vehicle first used for personal purposes doesn’t qualify in a later year if its purpose changes to business.
Both new and used Isuzu Trucks (and upfitting) from Liberty Isuzu qualify for Section 179 deductions. The vehicle must be “new to you,” but does not have to be a new vehicle itself.
Note that because many vehicles can function as both business and personal vehicles, 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” such as Isuzu Trucks, by their nature, are not likely to be used for personal purposes, so they will typically always qualify for full Section 179 deduction. This includes the following vehicles:
Bonus depreciation, which is generally taken after the Section 179 spending cap is reached, is offered at 100% on eligible new or used assets acquired in the current year.
Under the Tax Cuts and Jobs Act, first-year bonus depreciation at 100% will remain in effect until January 1, 2023. Following that, the following phase-down will begin to occur:
80% for property placed in service after December 31, 2022 and before January 1, 2024.
60% for property placed in service after December 31, 2023 and before January 1, 2025.
40% for property placed in service after December 31, 2024 and before January 1, 2026.
20% for property placed in service after December 31, 2025 and before January 1, 2027.
Exceptions include the following vehicles:
Ambulance or hearses used specifically in your business
Taxis, transport vans, and other vehicles used to specifically transport people or property for hire.
Qualified non-personal use vehicles specifically modified for business (e.g. work van without seating behind driver, permanent shelving installed, and exterior painted with company’s name)
Other heavy “non-SUV” vehicles and trucks with a cargo area at least six feet in interior length (this area must not be easily accessible from the passenger area.) To give an example, many pickups with full-sized cargo beds will qualify for a full deduction (although some “extended cab” pickups may have beds that are too small to qualify).
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.
The Section 179 Deduction is a tax incentive that is easy to use, and gives businesses an incentive to invest in themselves by adding capital equipment – equipment that they use to improve their operations and further increase revenue. In short, taking advantage of the Section 179 Deduction will help your business add equipment – including new and used Isuzu Trucks and upfitting equipment – while allowing you to keep more of your tax dollars.
While we have put this guide together to help you navigate Section 179 deductions, Liberty Isuzu is not a professional tax advisor. Be sure to consult a licensed tax professional or the IRS for exact rules regarding Section 179 and how it relates to your Liberty Isuzu Truck and equipment purchase.