SECTION 179 for 6000 Pound SUV or Truck

Tax saving tips for SECTION 179 for 6000 pound SUV or truck allowed for 2014? Concerns you should think about when you buy equipment and other assets

I get a lot of questions about  getting big  tax write offs this year by buying a used SUV or truck for $25,000 to $40,000.  Writing off a vehicle over 6000 pounds has been a great way to enjoy the “new” vehicle while having Uncle Sam pay for part of the cost!

I tell clients that they will need to wait until we see if the Section 179 write offs are going to increase above the current allowable $25,000 fast depreciation write off.
First, you only get the business percentage use so if you bought a SUV for $40,000 and you used the vehicle 80% of the time for business,  you could only write off $20,000 or 80% of $25,000, not the $25,000.
Second,  you only get the Section 179 write off up to the taxable income. If you have $10,000 business taxable income, you get to use only $10,000 Section 179.
Third, if you already bought that new computer system for $25,000 and decided to use the 2014 $25,000 Section 179 fast depreciation write off for a 6000+ pound vehicle too, you would not be allowed to use the Section 179 fast depreciation unless Congress reinstates the higher dollar write off for Section 179.
Why did Congress enact the $500K allowance for Section 179 from 2010 through 2013?  Because the economy was suffering due to the financial meltdown of 2008.

Under Internal Revenue Code Section 179(b)(1), the maximum deduction for years 2010 through 2013 was $500,000. If you made $500,000 taxable income and bought trucks for $500,000, you could wipe out the taxable income. You didn’t even have to pay for the 6000+ pound vehicles even if you were on a cash basis.
However, when a business bought too many assets, the allowance was reduced.  But the law says that Section reverts back to the old law “beginning after 2013” which is only $25,000.

So what should you do?  I recommend that if you do not want to buy a vehicle over 6000 pounds that your CPA tax specialist asks you important questions to decide whether you should buy or lease. If you have your heart set on the vehicle  over 6000 pounds,  I recommend that you wait until we know whether the Section 179 allowable dollar amount will increase.
So,  what if you do not buy any new furniture, fixtures and equipment or you use the new capitalization elections so you do not need the Section 179 deduction for non-vehicles?  In these cases you can buy a new or used vehicle over 6000 pounds as long as you buy one that doesn’t cost a lot more than $25,000. However, be careful! Why?

Because if you place in service (means that date the asset can be used)  over 40% of your assets in the 4th quarter, you will not be allowed to use the Section 179 deduction. So, put the new SUV or truck over 6000 pounds in service by September 30th unless you buy more than  60% of your total assets by September 30th (then the 4th quarter purchase date is fine).
Let us use a real example assuming that the Section 179 allowance stays at just $25,000 maximum.
You buy $50,000 of furniture, fixtures and equipment including computers.  You have until the due date plus extensions to decide how you will depreciate or write off the $50,000. Maybe Congress will reinstate $500K+ of allowed Section 179 retroactively back to 1-1-14.  Maybe they won’t and you will use bonus depreciation which allows a 50% write off under Code Section 168.

My intuition tells me we will know by September 15 what Congress will do and then we can plan.  If you need assets to run your business and you can wait until September 15, then you should wait. If you need to replace an asset, you should replace that asset.
Also, if you use the cash method to get deductions to pay off payable and prepay expenses, maybe you won’t need the Section 179 deduction because you’re taxable income will be low enough.

The best thing is to speak with your CPA tax reduction specialist!

If you enjoyed this article, please consider sharing it!
Icon Icon Icon


No Obligation FREE Evaluation: Guaranteed to Reduce Your Taxes






About Jeffrey Brooks

Jeffrey Brooks, CPA, CFP, MBA since 1976 has specialized in helping clients save significant taxes, help businesses increase their cash flow, revenues and profits while increasing their control and satisfaction. Jeff and his accounting firm sincerely cares about the happiness of his clients.

Get In Touch

JBrooks Wealth Advisors, PC.

Certified Public Accountant
Address: 4647 N 32nd Street, Suite B245
Phoenix, Arizona 85018
Phone: 602-292-2009