Section 179 IRS Tax Deduction
Medium Duty Trucks Purchased in 2023 may be Eligible for Section 179 Tax Savings
It’s always a good time to start thinking about your business’s taxes and how to make the most of allowable IRS tax deductions. Section 179 of the IRS Tax Code is designed to encourage business owners to reinvest in their business by allowing them to deduct the full purchase price for qualifying equipment on the current year’s tax filing.
Most medium-duty trucks qualify for this deduction; however, it is important to consult your tax professional as you determine if a new truck is right for your business. No matter what your needs are, when you decide to purchase a work truck, the experts at James Wood Isuzu Trucks can help you get behind the wheel of a new or used Isuzu Truck.
How Can My Business Benefit from the Section 179 Tax Deduction?
Thanks to tax reform, unlike other business purchases, equipment eligible for Section 179 does not have to be deducted each year through depreciation. The full amount of the qualifying purchase price can be deducted from the current year’s tax filing as long as the equipment is placed into service before the new year.
The sales specialists at James Wood Isuzu Truck can help you decide what type of Isuzu truck will best serve your business, how to upfit the truck to meet the unique needs of your industry. That’s what we do best! Please consult your tax accountant to help determine if the truck is eligible for the Section 179 tax deduction for your specific situation – that’s what they do best!
Call us today at (940) 539-9530 and our friendly, knowledgeable sales team can help you find your next medium duty truck.
Is Section 179 Complicated?
Contrary to many parts of the IRS Tax Code, Section 179 is not difficult. It was designed to be as simple as possible to encourage reinvestment in businesses as a way to stimulate the economy. For the purchase to be eligible for Section 179, there are a few stipulations the equipment must meet. To qualify for the deduction, the medium duty truck also must be used for business purposes more than 50% of the time. To determine if the work truck will meet this guideline, simply multiply the cost of work truck by the percentage of business-use to arrive at the monetary amount eligible for Section 179. Finally, the work truck cannot be purchased from a related party or it won’t qualify for the deduction.
Additionally, there are caps to the total amount written off ($1,160,000 for 2023), and limits to the total amount of the equipment purchased ($2,890,000 in 2023). The deduction begins to phase out on a dollar-for-dollar basis after $2,890,000 is spent by a given business (thus, the entire deduction goes away once $4,050,000 in purchases is reached).
All businesses that purchase, finance, and/or lease new or used business equipment during tax year 2023 should qualify for the Section 179 Deduction (assuming they spend less than $4,050,000).
Bonus Depreciation Being Offered in 2023
Bonus depreciation is offered some years, and some years it isn’t. Right now in 2023, it’s being offered at 80%.
The most important difference is both new and used equipment qualify for the Section 179 Deduction (as long as the used equipment is “new to you”), while Bonus Depreciation has only covered new equipment only until the most recent tax law passed. In a switch from recent years, the bonus depreciation now includes used equipment.
Bonus Depreciation is useful to very large businesses spending more than the Section 179 Spending Cap (currently $2,890,000) on new capital equipment. Also, businesses with a net loss are still qualified to deduct some of the cost of new equipment and carry-forward the loss.
When taking advantage of Section 179. The business must include a brief description of the truck, the total cost, and the amount to be deducted through Section 179 within Part I of the IRS Form 4562. The amount being claimed as Section 179 should be included on Line 6 of Form 4562.
How Much Could I Save?
Nothing can take the place of good advice from your tax professional or someone who understands the implications of Section 179 as it relates to your tax situation. However, here is an example of the tax savings on a $50,000 purchase.
|2023 Equipment Purchases||$50,000|
|Assuming a Tax Bracket of||35%|
|Section 179 Deduction||$50,000|
|Bonus Depreciation Deduction
(80% in 2023)
|Normal First Year Depreciation||$0|
|Total First Year Deduction||$50,000|
|Cash Savings on Your Purchase||$17,500|
|Lowered Cost of Equipment
(after tax savings)
If you are ready to start shopping for a New or Used Medium Duty Truck, call today at (940) 539-9530 to speak with a James Wood Isuzu Truck Sales Consultant.