The Best Section 179 Vehicles for 2022
A section 179 vehicle is an important part of any business’s arsenal. They provide a way to defer taxes and reduce your overall tax burden, helping you to grow your business while keeping cash in the bank. In this blog post, we will go over the best section 179 vehicles for 2022 and detail which ones are the best for each type of business. From small businesses to startups, no business is too small or too big to benefit from using a section 179 vehicle.
There are times and cases when we need to save money; in fact, there is nothing like enough savings for any individual. A bit of rightful savings goes a long way in allowing us ‘feel’ good about our account status. One of the major pitfalls when it comes to ‘our money’ simply disappearing is the evil taxes. This is especially relevant for the small-time businesses post-Covid Era who have suffered massively due to the various financial losses. Hence, the Indian Revenue Service or the IRS has come up with a variety of tax incentives to assist such businesses to save and grow money likewise. In case one has bought or leased a vehicle for a small-scale business, this allows you to be qualified for the Section 179 tax deduction. But what is Section 179 and how has it been created to, in fact, assist you? Let us find out more.
What is Section 179?
When we consider purchasing equipment or a vehicle, it is not possible to expense 100% of the cost within the first year. Instead one can capitalise the purchase and expense of the initial cost for many years through a process known as ‘Depreciation’.
However, the best part of Section 179 is that it can easily help the individual to be able to recover the entire cost of the vehicle if it is a qualifying section 179 property till a certain limit. This is done by deducting it in the year that the property has been placed in service. In this case, one can save a huge chunk of money during the first year by saving a ton of money during tax time. However, according to the policies stated by IRS, some limits exist, and one can automatically deduct all the costs once the vehicle has been purchased for the business.
As stated by IRS: ‘The maximum section 179 expense deduction for sport utility vehicles placed in service in tax years beginning in 2021 is $26,200. This ceiling helps avoid the “Hummer writeoff,” write-off, businesses using Section 179 to expense the costs of excessively expensive SUVs.
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The Bonus Depreciation
To be able to incentivize a huge purchase, a special Depreciation Allowance or a Bonus Depreciation has been offered by IRS. This can be easily used in combination with Section 179 which in turn allows the business to deduct almost 100% of the qualifying purchase within the first year itself. However, the stated limit applies to various vehicles.
Note: As of 2022, the special Depreciation Allowance, the Limit on Depreciation and the Section 179 deduction in the case of those vehicles that have been purchased after September 27, 2017, and are in service during 2020 to remain at $18100.
In addition to the stated limit of $18200, the maximum deduction has been completely exempted following section 179 vehicles by the IRS:
- Designed to be able to seat nine or more passengers behind the driver’s seat.
- The vehicle also comprises the Cargo area, which is either closed or open which is almost 6 feet in the interior space. This space is not readily accessible from the passenger compartment.
- The vehicle comprises an integral enclosure which completely encloses the driver’s compartment and the load-carrying device. It also does not comprise the seating rearward of the driver’s seat nor does it comprises a body section protruding for more than 30 inches outside of the leading edge of the windshield.
So, you see, for your vehicle to qualify for the complete deduction amount section 179 it needs to fall into any of the above three categories.
Section 179 for Vehicles: All About It
One of the main criteria for the vehicle to qualify for Section 179 is that it should be for business purposes as opposed to personal use for more than 50% of the time. This criterion is essential, as the individual will not qualify for the section 179 deduction in case of usage of less than 50% of the time.
However, in the case of vehicle usage of more than 50% of the time but less than 100% for business purposes. According to IRS, if the property is used fore than 50% of the time but less than 50% for business usage, one will need to calculate the allowable deduction. According to IRS: If you used the property more than 50% for business, multiply the cost of the property by the percentage of business use. The result is the cost of the property that can qualify for the Section 179 deduction.
Generally, the owners calculate the business use based on Mileage. For instance, a user has bought a vehicle for business use and has driven for about 10000 miles during the first year. In case 6000 of this was for business purposes, hence this translates to 60% of the entire mileage. Hence it qualifies for the Section 179 vehicle. If you have purchased the vehicle for $20000, then $12000, which is 60% of the total amount will make it qualifiable for section 179.
What are the Vehicles that Qualify for Section 179?
According to Section 179, the vehicles that qualify are among the three major categories:
- The Cars: This is applicable for the $18200 deduction limit. For depreciation, a car is qualified as any vehicle which is four-wheeled that is made primarily for use on Public Streets, highways and roads. Also, the unloaded gross weight should not exceed more than 6000 pounds.
- The SUVs: This is applicable for a deduction of $ 26 200 limit. This qualifies any vehicle that has been designed to carry passengers on public streets, highways and roads, and is weighted at not more than 14000 pounds gross.
- The Other Vehicles: This is applicable for a deduction limit of about $ 1050000. These vehicles category comprises the three exceptions stated in the above section: large passenger vans, Cargo vans and pickup trucks.
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What is the Difference between the GVWR and Curb Weight?
When it comes to the IRS, the vehicle weight is calculated using the Gross Vehicle Weight Rating or the GVWR. This is the actual maximum safe weight of any vehicle. Likewise, the Curb weight is the uploaded or the empty weight of the vehicle.
For instance, if a vehicle weighs about 4000 Pounds of curb weight, the safety regulators will be able to calculate that this vehicle can carry about additional 2000 Pounds inclusive of fuel, passengers, equipment, and cargo. Hence, the GVWR will amount to 6000 Pounds. These details are available on the driver’s side door panel of a vehicle and are vital for considering various aspects of Section 179.
The Luxury Vehicles Qualified for Section 179
According to this category the luxury vehicle should have a Gross Vehicle Weight Rating of about 6000 Pounds. However, one must bear in mind that a luxury SUV falls anywhere between 6000 to 14000 Pounds. As mentioned earlier, a maximum of $18200 first-year section 179 bonus Depreciation and a regular depreciation limit apply for cars and a $26200 limit is applicable for SUVs.
- The 2022 Mercedes G-Class
This is a High-end luxurious SUV that has an impressive 416 Horsepower, V8 engine. It also has a $154520 MSRP and a 6945 Pound GVWR, hence the owners are qualified for a whopping $26200 Section 176 SUV deduction.
- The 2022 Tesla Model X
This is a luxurious crossover SUV which is equipped with a 1020 peak of Horsepower and an electric engine. The MSRP starts at $79990 and also includes 6800 Pounds of GVWR. Hence the business owners who qualify for section 179 for a deduction of $25200.
- The 2022 Range Rover P525
This is a high-end luxury SUV that comprises 518 Horsepower and a V8 engine. This has a $105950 MSRP and 6967 Pounds of GVWR. Hence the qualifying business owners can easily enjoy a deduction of $ 26200 under section 179.
The Trucks: Qualifying for Section 179
As mentioned above section 179 is applicable for the pick-up trucks that comprise the following criteria: Should have a cargo area of a minimum of 6 feet of interior length and which is not readily accessible for the passenger compartment. When all three of the criteria are met, then the Truck business owner is qualifiable for the complete Section 179 deduction of $1050000.
The 2022 Chevy Silverado 3500 Duramax Diesel
This is considered to be a heavy-duty pick-up truck comprising a 445 Horsepower and V8 engine that can tow up to 36000 Pounds. The MSRP for this starts at $40700 and the extended bed allows the business owners for a section 179 deduction from the total amount.
The ‘Other’ Vehicles: For Section 179
This category primarily comprises three categories:
- A passenger van that can carry about nine passengers at a time.
- The Cargo vans.
Hence, if any vehicle fits within both criteria then it can qualify for the full section 179 deduction. Hence the business owners can deduct the entire cost within the first year itself
The 2022 Ford Transit
This vehicle is a large passenger van with a seating capacity of 15 people. It has an MSRP of $41 945. However, due to the passenger carrying capacity, this vehicle qualifies for the complete section 179 deduction amount. Nevertheless, one has to bear in mind that a 100% of business use has been accomplished and the entire purchase amount within the first purchase year itself.
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So, there you have it, people, these are some of the major facts, features and aspects of The Best Section 179 Vehicles for 2022. But, tax can be a tricky aspect for many to understand. However, you can easily reach out to our team of experts and we will be delighted to assist you accordingly.
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💠Frequently Asked Question💠
Do I need to know about the time limit for the usage of Section 179, 2023 for Vehicles?
Yes, there is a time frame that you need to be aware of. This is applicable for the vehicles that are bought and put into service between 1/1 and 12/31 for the calendar year you are considering.
Is it possible to Finance a Vehicle and apply the section 179 deduction as well?
Yes, the good news is that one can easily acquire the work vehicle needed and save on taxes as well. Also, if your company is more than two years old along with a good credit history, you can save a lot more with the help of Section 179 Qualified Financing.
Is Section 179 applicable to the Work Vehicles that are sold by My company?
The Credit Capital’s Vendor Program offers financing on work vehicles that are used 100% for business and not personal use. It is important to bear in mind that the program is not applicable for common passenger cars but for true work vehicles like delivery trucks, heavy pieces of equipment, construction vehicles, dump trucks, tow trucks, trailers and speciality business vehicles.
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