Maximize Your Tax Savings with Section 179: Deduct the Cost of Your Commercial Truck Purchases in 2023

As tax season approaches, it's time to think about maximizing your deductions for business purchases. If you've added new trucks or vehicles to your fleet this year, you may be eligible for a valuable tax benefit - Section 179 of the U.S. Internal Revenue Code.

What is Section 179? It's an immediate expense deduction that allows businesses to write off the entire value of qualifying purchases, including vehicles and trailers, to decrease their taxable income for the year. This article will provide everything you need to know about Section 179, from how much you can deduct to filing for the deduction.

The Benefits of Section 179: Dramatically Reduce Your Taxable Income.

Section 179 was originally designed for small businesses but larger businesses can also benefit. This deduction allows you to immediately deduct the full purchase price of qualifying equipment, machinery, or software from your taxable income. Rather than spreading the cost over several years, you can deduct the entire amount in a single year. This could lead to substantial tax savings and even affect your marginal tax rate.

Grow Your Business Now: Use Your Tax Savings to Invest in Equipment.

Section 179 was created to help businesses invest in themselves and stimulate the economy. By using the tax savings to purchase the equipment you need right now, you can accelerate your business growth. This means you could add a new truck to your fleet this year instead of waiting.

Know the Numbers: 2023 Section 179 Deduction Limit and Spending Cap.

For 2023, the maximum Section 179 deduction is $1,160,000, an $80,000 increase from the previous year. You can combine multiple qualifying expenses, but you cannot exceed the yearly limit. Remember that your deduction cannot exceed your qualifying taxable net income. If it does, you can carry forward the remaining balance to future tax years.

Ensure Your Deductions: Requirements for Business and Vehicle Use.

To take the full Section 179 deduction, your equipment or vehicles must be used for business purposes 100% of the time. If the item is used at least 50% of the time for business purposes, you can still take a prorated deduction. Simply multiply the cost of the item by the percentage of business use above 50% to determine the eligible deduction.

Don't Miss Out: Understand the Section 179 Spending Cap.

To benefit from Section 179, your business must have spent $2,890,000 or less on qualifying equipment in 2023. The deduction limit decreases for every dollar spent beyond the cap. If equipment expenditures reach $4,050,000, your business will no longer qualify for the deduction.

Discover the Vehicles that Qualify for the Section 179 Deduction in 2023

Qualifying for the Section 179 deduction is easier than you think. All you need to do is purchase, finance, or lease a vehicle and put it into service before the end of the tax year. But there are a few important criteria to consider.

First, the vehicle can be new or used, as long as it's "new to you." However, it must be acquired through a legitimate transaction, not inherited or gifted. Additionally, vehicles purchased from a direct relative are not eligible. Furthermore, the vehicle must be titled in your company's name, not the owner's name.

The IRS classifies qualifying vehicles into three categories: Light, Heavy, and Other. Each category has its own deduction limit, which may change annually to account for inflation. Keep in mind that the deduction limit may also be prorated based on the percentage of business use.

For Light Vehicles, which include passenger cars, crossover SUVs, and small utility trucks, the deduction limit in 2023 is $12,200. Heavy Vehicles, such as full-size SUVs, commercial vans, and pickup trucks, have a deduction limit of $28,900 in 2023. Other Vehicles, like tractor trailers, shuttle vans with at least nine passenger seats, and cargo vans, have no extra limitations. You can deduct 100% of the cost for vehicles falling into this category.

2023 Bonus Depreciation

But that's not all. In addition to the Section 179 deduction, you may also qualify for bonus depreciation. Bonus depreciation allows you to immediately deduct a percentage of the cost of qualifying equipment or vehicles acquired in the calendar year. For 2023, the bonus depreciation allowance is 80% of the value of qualifying purchases.

Unlike Section 179, there is no limit or spending cap on bonus depreciation deductions. This means that even larger businesses can benefit from it, regardless of their expenditures.

You can also claim both Section 179 and bonus depreciation deductions in the same tax year, with Section 179 deductions taking priority.

If you're wondering how much you could potentially save on your taxes by claiming a Section 179 deduction, now is the time to calculate. For example, imagine purchasing a used truck for $90,000 and claiming the full cost as a Section 179 deduction. This could save you $31,500 on your taxes, significantly reducing the true cost of the truck.

How to Calculate Your Section 179 Vehicle Deduction

To make calculations easier, we recommend using the Section 179 calculator from Section179.org. It is updated to reflect the current 2023 limits and includes bonus depreciation.

CLAIM YOUR SECTION 179 DEDUCTION AND SAVE ON YOUR 2023 TAXES

Maximize your tax savings for your business by understanding how to claim your Section 179 deduction. Take the first step in filing your 2023 taxes by calculating your taxable income and determining your eligible deductions. Then, gather the necessary financial records for each purchase you want to claim.

Fill out IRS Form 4562 to itemize your purchases and include any carry-forward deductions from previous years. Get expert advice from an accountant or tax professional to ensure you're making the most of your Section 179 and other potential tax deductions.

At Westrux International, we offer a wide selection of new and used commercial vehicles that can deliver both on your business needs and tax savings. Explore our inventory or contact us now to find the perfect vehicle for your business. Start saving on your 2023 taxes today!