Section 179 Deduction on Used Commercial Vehicles: Get More Benefits for Your Business

The Section 179 deduction is a tax code allowing businesses of any size to deduct the purchase price of qualified equipment or software purchased or leased during the tax year. This means that if you buy a vehicle for commercial purposes in Indiana, you can get substantial tax benefits for your business. Today, representatives of the Indy Auto Man dealer center prepared a quick guide on what vehicles qualify and how to get a tax deduction 2024.

You may be well aware that taxes can be a major expense. However, there is a tax provision that can help you save money and invest in your business. This provision is known as Section 179 Internal Revenue Code. The Section 179 purpose is to encourage entrepreneurs to invest in themselves and grow by allowing them to deduct the purchase price of a qualifying commercial vehicle or other equipment from gross income. The idea is that if companies can retain more of their profits, they will have more likelihood of investing in business and creating more jobs.

Section 179 can be a powerful tool for businesses of all sizes, from a single owner to large corporations. Read further to understand the rules and limitations of the provision to maximize your tax savings and benefits.

The Section 179 deduction was once called the “Hummer tax deduction”. This nickname meant for business owners the possibility to utilize the generous limits to purchase costly trucks. Initially, the deduction was restricted to vehicles weighing less than 6,000 pounds. This impacted the tax implications for many high-end cars. Larger SUVs can be quite heavy, and they were not subject to these regulations. Today, a lower limit for SUVs is included in Section 179. To ascertain if your car qualifies for the Section 179 deduction, check several key factors that come into play in determining its eligibility. 

Most commercial vehicles (trucks, vans) qualify for a Section 179 deduction, including:

• Cargo vans with a fully enclosed cargo area, with no seats behind the driver’s seat;
• Shuttle vans with a passenger capacity of nine behind the driver’s seat;
• Tractor Trailers;
• “Singular use” commercial vehicles like ambulances.

Typically, vehicles weighing between 6,000 lbs. and 14,000 pounds and used for business transportation at least 50% of the time generally qualify for the deduction. However, the specific deduction limits may differ based on the type of vehicle:

• Pickups with a full-size cargo bed qualify for a deduction equal to the share of their commercial use. For example, if you purchase a $50,000 truck used 80% for business, your deduction would be 80% of $50,000, or $40,000.
• Heavy SUVs qualify based on a business-use percentage as well but with a maximum deduction of $30,500 for 2024.
• Small Vehicles with GVWR lower than 6,000 lbs used for commercial purposes more than 50% of the time.

This means that even if you own a small business, you can save on luxury cars like BMWs and Mercedes without worrying about depreciation.

Used vehicles can qualify for Section 179 if they meet the condition “new-to-you.” A van, truck, or SUV must be acquired through a transaction at fair market value, and either bought outright or financed with certain leases and loans. Importantly, the vehicle must be registered under the company's name and should be utilized for business purposes for at least 50% of its usage.

The previous version of the EV tax credit faced criticism due to its exclusion of pre-owned vehicles. Starting in 2023, eligible used EV acquisitions could entitle taxpayers to a credit of up to $4,000, capped at 30% of the vehicle's cost.

Additional criteria include:

• The used vehicle must be a plug-in electric or fuel cell car with a minimum battery capacity of 7 kilowatt hours.
• Applicable only for the first transfer of ownership.
• The purchase price of the vehicle must not exceed $25,000.
• The vehicle's weight must be under 14,000 pounds.
• The car model should be at least two years old.
• The credit can be claimed once in three years.

If you are looking for a high-quality used vehicle for your business, at Indy Auto Man, Indianapolis, you will find an array of trucks, vans, and SUVs that can qualify for Section 179 deduction and serve you well for years. Check our inventory and contact us to get your best car-buying experience.