A majority of U.S. companies invest in heavy vehicles to operate their businesses. They rely on these trucks, SUVs, and vans to transport goods from production to the consumer. Take Amazon, for example. Could you imagine a world nowadays where those dark-gray delivery trucks weren’t trolling through your neighborhood? It goes without saying that these heavy-duty vehicles play an integral role in creating happy customers and prospering businesses.
And though taxpayers see heavy vehicles by the dozen, particularly on highways and busy shopping centers, some aren’t aware that these trucks are one of the biggest investments that business owners make. Not to mention, until recently, there were very minimal tax breaks on trucks of this stature and size. But now, thanks to the new tax law, heavy vehicles are granted huge depreciation deductions throughout 2022.
How much can you write-off for a commercial vehicle?
For passenger vehicles, the IRS sets annual limits on how much you can deduct through depreciation. We break down those IRS restrictions in our guide to the new tax law. But what about heavy vehicles? Do they get treated the same? In contrast to passenger vehicles that are used for business purposes, heavy vehicles (that are more than 6,000 pounds loaded gross weight) are eligible for a different kind of deduction. With the amended changes to the new tax law, companies have two options for heavy vehicle tax deductions:
- Bonus depreciation
- Section 179
Before TCJA went into effect, bonus depreciation would generally vary by tax year. However, the new tax law made it possible for companies to depreciate the full cost of an expensive heavy vehicle in a single year. This development is rare and frankly an ideal time for business owners to invest in vans and trucks for business use. The other option (Section 179) is a set amount distinguished by the IRS. The new tax law also improved this tax deduction for business owners.
Does the 2022 tax year have bonus depreciation?
This is the last tax year to deduct 100% of heavy vehicles. The IRS plans to phase out bonus depreciation by 2026, with deduction percentages decreasing each year until then. Because passenger automobile deductions don’t apply to heavy vehicles, companies can take full advantage of bonus depreciation when you purchase a vehicle for business. Essentially, you can deduct 100% of the cost in one year of ownership, as long as you use the vehicle only for business purposes. If you’ve been wanting to buy a heavy vehicle, essentially now’s your chance.
What qualifies as Section 179 deduction?
The Section 179 deduction applies to tangible personal property such as machinery and equipment purchased for use in trade or business, and if the taxpayer elects, qualified real property, according to the IRS. The Tax Cuts and Jobs Act increased the maximum expense deduction from $500,000 to $1 million, but limitations still apply for heavy vehicles. And so, business owners can only deduct $25,000 for trucks and other heavy vehicles. With this information, it’s apparent the bonus depreciation is still the better option for your 2022 tax filing.
Do I need to track mileage?
Yes! To qualify for the bonus depreciation or Section 179 deduction, you must show substantial evidence that your company uses heavy vehicles more than 50 percent of the time. This is true for the full five-year depreciation period that applies to any business vehicle. By chance you dip below the 50 percent mark, you’ll end up having to pay back your bonus depreciation. As a business owner, this is something to be conscious of as you navigate logistics for the year.
In any case, it’s important to track your business mileage. Whether you choose the bonus depreciation or Section 179, you’ll want records of your business drives in the event that you’re audited by the IRS. By far the best way to avoid inconsistent reporting is to invest in a mileage tracking application. With MileIQ, companies can keep contemporaneous logs of all business drives and receive comprehensive reports that comply withIRS standards.
FAQs
Because passenger automobile deductions don't apply to heavy vehicles, companies can take full advantage of bonus depreciation when you purchase a vehicle for business. Essentially, you can deduct 100% of the cost in one year of ownership, as long as you use the vehicle only for business purposes.
What is the tax write off for heavy vehicles? ›
The 6,000-pound vehicle tax deduction is a rule under the federal tax code that allows people to deduct up to $25,000 of a vehicle's purchasing price on their tax return. The vehicle purchased must weigh over 6,000 pounds, according to the gross vehicle weight rating (GVWR), but no more than 14,000 pounds.
Can you write off 100% of a 6000 lb vehicle? ›
Yes, you can get a tax write-off for a vehicle over 6,000 lbs if you use it for business purposes. The tax write-off is known as the Section 179 deduction, which allows you to deduct the cost of qualifying vehicles from your taxable income.
What does the IRS consider a heavy vehicle? ›
Anyone who has registered or is required to register a heavy highway motor vehicle with a taxable gross weight of 55,000 pounds or more in their name at the time of first use on the public highways during the reporting period must file Form 2290, Heavy Highway Vehicle Use Tax Return.
How do I write off heavy equipment on my taxes? ›
A more popular heavy equipment tax deduction is Section 179, which comes from Section 179 in the IRS Tax Code. If you buy qualifying equipment, Section 179 allows you to deduct the total purchase price from your gross income from this tax year.
How does the 6000 lb vehicle tax deduction work? ›
Vehicles considered light vehicles weighing under 6,000 pounds are eligible for a tax deduction limit of $12,200 in the first year they're used—however, using the bonus depreciation option, you can deduct a significant $20,200. Heavy vehicles similarly have a unique deduction limit of $28,900.
Can you write off 100% of a truck? ›
This deduction applies to the purchase of business-use vehicles. The deduction amount varies depending on the size of the vehicle. Qualifying passenger vehicles are eligible for a fixed deduction (up to $18,200 per vehicle for 2021), while larger vehicles can qualify for a deduction of up to 100% of the purchase price.
Can you fully write off a 6000 pound car? ›
Section 179 deduction is limited to heavy-duty SUVs, with a gross vehicle weight between 6,000 and 14,000 pounds, and the allowed deduction is limited to the smaller of the purchase price or the business percentage of up to $28,900 in 2023.
Is Section 179 going away in 2024? ›
The Section 179 expense limit and phase-out threshold (inflation-adjusted to $1,220,000 and $3,050,000, respectively, for 2024) are now permanent parts of the tax code.
Can you fully depreciate a 6000 lb vehicle in one year? ›
For new and pre-owned (used) vehicles, the maximum write-off for the first year is $10,200, plus an additional $8,000 in bonus depreciation. For SUVs with weights over 6,000 lbs., but no heavier than 14,000 lbs., the full 100% of cost can be depreciated.
That's because the caps on annual depreciation and expensing deductions for passenger automobiles don't apply to trucks or vans that are rated at more than 6,000 pounds gross (loaded) vehicle weight. This includes large SUVs, many of which are priced over $50,000.
What is the heavy vehicle deduction for 2024? ›
Heavy SUVs also qualify based on business-use percentages but are subject to a $30,500 maximum deduction cap for 2024. Contrary to common perception, businesses cannot write off the entire cost of an SUV unless it is at or under the $30,500 cap.
What is the heavy car tax deduction for 2024? ›
What vehicles qualify for the Section 179 deduction in 2024? Obvious non-personal “work” vehicles (dump truck, backhoe, farm tractor, etc.) Specialty vehicles with a specific use (hearse, ambulance, etc.) *Note: Heavy SUVs have a deduction cap of $30,500 for the 2024 tax year.
Can you write off a skidsteer? ›
Your next landscaping skid steer, track loader, and mini excavator may qualify for a tax deduction. Check the list to see if your model may qualify under Section 179. For hardscaping businesses, there's an opportunity to take advantage of tax benefits with Section 179.
What qualifies for a Section 179 deduction? ›
Section 179 of the IRC allows businesses to take an immediate deduction for business expenses related to depreciable assets such as equipment, vehicles, and software. This allows businesses to lower their current-year tax liability rather than capitalizing an asset and depreciating it over time in future tax years.
How long do you have to keep a vehicle under Section 179? ›
The section 179 deduction is only available in the tax year the vehicle is purchased and placed in service for business use, and the vehicle must be used over 50% of the time for business purposes.
