
Business Vehicles/Section 179 Depreciation
Few things to know about Business Vehicles:
1) You must use the business vehicle at least 50% of the time in order to depreciate
2) The vehicle must be purchased or registered in the business name; click the link here to see additional details about how to transfer into the business name. NOTE: this is the guidance for Texas vehicle transfers only.
3) The vehicle is considered a "small" vehicle if it's Gross Weight is less than 6,000lbs; you should be able to find the GVWR for your vehicle in the owners manual. All vehicles between 6,000-14,000 are considered "heavy" vehicles.
4) If you purchase a new or used vehicle, it must be put into service, also referred to as “business use,” in the calendar year you buy it before December 31. You will need to provide proof that your vehicle was used for business when electing the Section 179 deduction.
5) Even if the vehicle is registered in the name of the business you still are required to track the business mileage. The best way to do this is through a third party app, such as QuickBooks Mileage, which is included in the cost of any monthly recurring online subscription. There are several other options you can choose from. You can also use oil change records from the beginning and ending of the year to track overall mileage.
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Business Use Defined: the % of the time the vehicle is used for business purposes. Ex. if you drive your business vehicle 9,000 miles during the year and 1,000 miles for personal reasons then your business use is 90%.
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Section 179 Depreciation:
This is one of the best tax savings strategies around. If your business vehicle qualifies and it is considered a "small" vehicle you can depreciate up to $10,100 in the first year you place the vehicle in service. If your business vehicle qualifies and it is considered a "heavy" vehicle we can depreciate the entire business use of the vehicle. Ex. Business mileage during the year 12,000 miles, personal mileage 2,000 miles. Original cost of the vehicle was $50,000 with a Gross Weight of 6,500. Max depreciation allowed in the first year: $42,857. LIMITATION: Section 179 depreciation is limited to the total profit the business earned during the year. If you cannot claim the full Section 179 depreciation in the year of purchase then the Section 179 rolls over to the next year.