Are you a small business owner? Do you have the need for particular vehicles in order to expand your business? If that's the case, you may be able to use the Section 179 Deduction.
Known as the "Hummer Tax Loophole," this deduction allows businesses to buy large sport-utility vehicles and write them off. You didn't think buyers picked up H2s and Range Rovers, and slapped stickers on them just to promote their businesses, did you?
Vehicles and Section 179
One of the more popular uses for the Section 179 Deduction is for vehicles. In fact, Section 179 is 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, it is still true that Section 179 can be very advantageous in buying vehicles for your business.
Here are the general guidelines for using the Section 179 Deduction for vehicle purchases:
What Vehicles Qualify?
Vehicles used in your business qualify - but certain passenger vehicles have a $25,000 limitation, 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:
SUV’s and any 4-wheeled vehicle designed or used to carry passengers over public roads with a Gross Vehicle Weight (GVW) of more than 6,000 lbs and not more than 14,000 lbs (see below for limits on these heavy SUVs)
Heavy “non-SUV” vehicles 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 (although some "extended cab" pickups may have beds that are too small to qualify.)
Vehicles that can seat nine-plus passengers behind the driver's seat (i.e.: Hotel / Airport shuttle vans, etc.)
Vehicles with: (1) a fully-enclosed driver's compartment / cargo area, (2) no seating at all behind the driver's seat, and (3) no body section protruding more than 30 inches ahead of the leading edge of the windshield. In other words, a classic cargo van.
Heavy SUV’s get a reduced deduction
There is a limit you can deduct for example #1 above – SUV’s (as well as other passenger vehicles not listed above). The limit for the deduction is $25,000. However, you can take a normal depreciation deduction for the rest. So if you buy a $50,000 Hummer, you can deduct $25,000, and then take normal depreciation (20%) on the remaining $25,000.
Examples 2-4 qualify for the normal Section 179 Deduction limits (currently $500,000 in 2010).
Other Considerations
Vehicles can be new or used (“new to you” is the key.) The vehicle can also befinanced with certain leases and loans, or bought outright.
The vehicle in question 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.
[Source: Section179.org & YouTube]
**Disclaimer: Consult with your tax advisor before acting on Section 179. AutoSpies is not a financial advice site or financial advisor.
2011 San Diego Auto Show Photo Gallery
2010 Subaru Outback Photo Gallery
2012 Mercedes-Benz C-Class Photo Gallery
Audi A7 Sportback 3.0 TDI Photo Gallery
MINI Paceman Concept Photo Gallery
Read Article