A Primer on the Section 179 Vehicle Deduction

If you own a small- or medium-sized business, you can upgrade your fleet and reduce your tax burden with the Section 179 tax deduction. Section 179 of the Internal Revenue Tax Code allows business owners to write off up to the total purchase amount of a truck, van, or SUV instead of depreciating it a little over several years. The primary stipulation is that it must be used for business purposes more than 50% of the time and that different classes of vehicles have different levels of deduction. This section also applies to other capital expenses, such as equipment and software placed in service during the year. The deduction is up to $1.16 million for 2023 (the figure is adjusted for inflation). Two general limits on the allowance’s use include:

1. The allowance cannot exceed a business owner’s income from all trades or businesses they own. 
2. The allowance phases out if the total amount of qualified assets placed in service in a year exceeds $2.89 million for 2023. This figure is also indexed for inflation.

Therefore, a business may not claim an IRC Section 179 expense allowance in 2023 if assets placed in service during the year reach or exceed $4.05 million ($1.16 million + $2.89 million). These limits keep the deductions focused on benefitting small businesses. 

Qualifying Vehicles

Because the code is primarily designed to help businesses that need large vehicles, a more significant deduction can be made for larger vehicles. The Section 179 qualifications for vehicles to deduct 100% of the purchase price include:

• Apparent non-personal “work” vehicles (dump truck, backhoe, farm tractor, etc.)
• Specialty vehicles with a specific use (hearse, ambulance, etc.)
• Delivery use vehicles (cargo vans, box trucks)
• Heavy SUVs, pickups, and vans over 6,000 lb. GVWR
• Road-going vehicles under 6,000 lb. can qualify for a deduction of less than 100% of the purchase price.

Consequently, Chevrolet GMC and Buick lineups qualify for Section 179 in the following ways:

Up to 100% of purchase price

• Silverado/Sierra 1500/2500/3500 – Standard and Long Bed
• Silverado/Sierra 3500 HD Chassis Cab 
• Express/Savana Cargo Van 
• Express/Savana Passenger Van
• (10+ passenger seating only) 
• Express/Savana Cutaway

Up to $25,000

Plus up to 80% of the remaining purchase price plus standard depreciation

Other trucks, passenger vans, and SUVs – GVWR greater than 6,000 lbs. 

• Silverado/Sierra 1500 
• – Short Bed 
• Tahoe/Yukon (including Denali)
• Suburban/Yukon XL (including Denali)
• Traverse/Acadia/Enclave
• HUMMER EV Pickup
• HUMMER EV SUV
• Colorado/Canyon
• Express/Savana Passenger Van (all except 10+ passenger seating)

Up to $20,200

• The rest of the Chevrolet, GMC Buick lineup

Usage Qualifications

The vehicle must be registered in the business name for which you will take the deduction. The other primary qualification is that over 50% of the vehicle’s usage must be for business use. That does not include personal use, nor does it include commuting. Having a business logo on the exterior or even full advertising on the exterior does not qualify the commute as advertising. In addition, a driver conducting business calls a passenger conducting business while commuting, which is also not considered vehicle business use. 

Thus, to qualify a vehicle for Section 179, you must keep mileage records of road-going vehicles to substantiate that more than 50% of its use is for business. This will include the original invoice, mileage logs, and any related expenses that can verify the claim. There are apps for your phone that can help you track mileage and expenses. Like other business records, documents that confirm your business use claim should be retained for three years after you file your return in case the IRS audits your tax return. 

Vehicles Can Be Used and/or Financed

You can finance a qualifying vehicle over several years and still qualify for the entire purchase deduction, which applies to purchases up to December 31st. We do not recommend you wait that long. The purchase of a used qualifying vehicle will also apply, stipulating that the vehicle must be new to you and the business. 

Understanding the Section 179 deduction is essential for any small business owner looking to maximize their tax savings. This is only an introduction to the concept, so Dieffenbach GM recommends that you consult with your tax professional and stay updated on the latest tax laws to take full advantage of this valuable tax incentive.