Section 179 of the U.S. tax code presents a welcome opportunity for small-business owners like you to save money at tax time. An economic incentive designed to encourage the purchase of business-related equipment, thereby spurring growth in the economy, Section 179 lets taxpayers deduct the full or partial cost of certain types of property from their federal taxes for the year the property was purchased and put into service.
Previously in a state of flux from tax year to tax year, the U.S. House and Senate last December approved a bill to permanently raise the Section 179 deduction limit to $500,000 on qualifying equipment. The term “qualifying equipment,” as defined by the IRS, relates to machinery, computers, office furniture, software and so on. Visit the IRS website to see the list of purchases that qualify.
While many people can and do apply the Section 179 deduction to vehicles purchased for business reasons, small-business owners should keep in mind that there may be restrictions in place for this type of purchase.
To put it simply, or as simply as possible, while vehicles unlikely to be used for personal use qualify for the full $500,000 deduction (vehicles with a fully-enclosed driver’s compartment/cargo area, for example), passenger vehicles are subject to certain deduction limits, even if they’re used for work more than 50% of the time. Similarly, SUVs, trucks and vans that do not meet specific IRS guidelines are also subject to limitations.
If you purchased or plan to purchase a new work vehicle in 2016, you may benefit from Section 179, regardless of deduction limits.* Consult this worksheet to see the estimated Section 179 expense allowances for Chrysler, Dodge, Jeep®, Ram and FIAT® brand vehicles.
Remember, if you want to take advantage of Section 179 during the current tax year, vehicles must be purchased and put into service by December 31, 2016. So don’t hesitate – contact your local BusinessLink dealer for help picking out the right work vehicle for your small business.
*Be sure to consult a certified tax preparer to understand how a vehicle purchase will affect the taxes of your business.