Doing Taxes

Section 179

Section 179 Deduction

| Section 179 and Commercial Trucks

The Section 179 Deduction Can Reduce the Cost of a Truck and Boost Your Bottom Line

Information on this site is for illustrative purposes only and accuracy is not guaranteed. Arrow Truck Sales and its employees are not tax advisors and this site is not intended to offer any tax advice. Please consult with qualified professionals concerning your specific situation. 

If you’re in the market for a used truck to build your small business, you need to know about the Section 179 tax deduction. This deduction was created to encourage small businesses like yours to invest in themselves by purchasing or leasing equipment essential for growth.

Section 179, unlike other tax provisions, is simple. It allows small to mid-sized businesses to deduct the full cost of a truck in the year it’s purchased and put into service. That means you can buy (or even lease) a commercial truck today and expense the entire cost this year. Thanks to section 179, you get a truck and a reduction in your taxable income; it’s a win all the way around.

Benefits to Your Business with Section 179

Typically, when your business purchases a significant asset like a truck, you’re required to spread the cost of that asset over a fixed period. For example, if you spend $100,000 on a truck, you might use straight-line depreciation to expense $20,000 of the price each year over five years. If you’re in a 30% tax bracket, that $20,000 would save you $6,000 each year in taxes. This is fine, but the small amount makes it less likely that the deduction will impact your overall tax bracket.

But, by opting for a Section 179 deduction, you could expense the entire $100,000 in a single year. A significant deduction like this will likely affect your marginal tax rate and represents substantial tax savings you can use to build your business. In fact, Section 179 may put a new truck within reach today.

As with any major purchase decision, we recommend you discuss strategies with your tax professional before proceeding.

Section 179 for Commercial Truck Purchases

Commercial truck purchases from Arrow Truck Sales may be eligible for Section 179. To qualify for a 2022 deduction, your purchase needs to be completed between January 1, 2022, and December 31, 2022, and the vehicle needs to be put into service in 2022. Here’s what you need to know:

1

Deduction Limit

The 2022 deduction limit is $1,080,000. This means your business can elect a section 179 deduction for asset purchases totaling $1,080,000. This amount could represent one or multiple assets, but you can’t deduct more than the yearly limit. And you can’t take a deduction that exceeds your qualifying taxable net income; if your 179 deduction is greater than your taxable income, you may be allowed to carry the remainder over to future years.

2

Spending Cap

The Section 179 incentive is really meant for small or mid-sized businesses. A spending cap on total equipment purchases or $2,700,000 ensures this incentive only goes to smaller organizations. For every dollar an organization spends on capital equipment beyond the $2.7M cap, the section 179 deduction goes down so that when total equipment spending reaches $3,780,000, the section 179 deduction is completely phased out.

If your capital spending is less than $3,780,000 this year, you may qualify for a section 179 deduction.

3

Bonus Depreciation

In some years, the IRS offers Bonus Depreciation. In 2022, Bonus Depreciation is offered at 100%. Similar to section 179, Bonus Deprecation allows business owners to take a percentage (100% in 2022) of the purchase price of eligible assets in the year of purchase. Bonus Depreciation differs from section 179 in the following ways:

  • Bonus depreciation is not subject to any dollar limitations. Entire multi-million-dollar acquisitions may qualify for bonus depreciation in a single year.
  • Bonus depreciation can exceed taxable income, creating a loss that can be carried forward.
  • Organizations of all sizes can use bonus depreciation to manage capital acquisitions and tax liabilities.
  • Typically, section 179 deductions are taken first, followed by bonus depreciation, if applicable.

This message does not constitute legal, tax, accounting, investment or other professional advice. Recipients should consult their professional advisors prior to acting on the information included in this message.

4

Understanding Section 179 Requirements

What else do you need to know?

  • All businesses that spend less than $3,780,000 on purchasing, financing, and/or leasing new or used equipment during the tax year of 2022 may qualify.
  • Most tangible goods, software, and business-use vehicles meet the requirements for the Section 179 Deduction.
  • While there are some limitations on the vehicles that qualify, generally all commercial trucks sold by Arrow Truck Sales are eligible for the section 179 deduction.

How to Calculate Savings on a Used Commercial Truck

Are you considering purchasing a used commercial truck this year? This easy-to-use, up-to-date Section 179 Deduction Calculator will estimate how much you can save by making the purchase this calendar year. Just enter the purchase price of the truck you’re interested in, and the calculator will do the rest.

Grow Your Company and Reduce Your Tax Bill

Interested in learning more?

A Section 179 deduction can positively impact the net cost of the vehicle and your bottom line. Talk to an Arrow Truck Sales team member today about your commercial truck needs; we’ll help you find the right equipment at the right price. The new truck you need to grow your business is within reach; give us a call today to find out how we can help make it happen.

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Arrow Truck Team

Disclaimer

Information on this site is for illustrative purposes only and accuracy is not guaranteed. Arrow Truck Sales and its employees are not tax advisors and this site is not intended to offer any tax advice. Please consult with qualified professionals concerning your specific situation. Arrow Truck Sales is not responsible for typographical errors.