Section 179 Tax Write-offs for Business Vehicles

How the Section 179 deduction works

Vehicles used for income-producing purposes can use a Section 179 deduction in the year you purchase and place the vehicle into service. It must be used for business purposes at least 50% of the time, and the deduction percentage can’t exceed the percentage of the car’s business use.

The maximum deduction varies based on vehicle size. For the 2023 tax year, the amounts are:

$12,200 for light vehicles under 6,000 pounds (plus up to $8,000 in bonus appreciation)
$28,900 maximum tax write-off for vehicles over 6,000 lbs

You may qualify for a larger 179-vehicle deduction if you’re eligible for bonus depreciation. This allows you to take a larger deduction in the first year. This rule is part of the Tax Cuts and Jobs Act of 2017 and is phasing out with lower depreciation rates between 2023 and 2026 before expiring completely. By 2026, you’ll only be able to deduct an additional 20%.

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Vehicles that are eligible for the section 179 deduction

Many vehicles qualify for section 179. The IRS doesn’t publish a complete list of eligible vehicles; instead, you need to look at the published requirements to see which type of deduction your vehicle falls under. As mentioned, it must be used for business purposes more than 50% of the time. In addition to purchasing new vehicles, you can qualify for a section 179 deduction for used vehicles as well. The deduction process works the same for both types of purchases.

The IRS categorizes eligible vehicles by size:

Light vehicles weigh under 6,000 pounds and include passenger cars, crossover SUVs, and even small trucks.
The 179 deduction for vehicles over 6,000 lbs is considered the heavy vehicle category. This typically includes things like pickup trucks, commercial vans, and larger SUVs.
For vehicles over 14,000 pounds, you can deduct 100% of the purchase price rather than being subject to the limitations assigned to IRS section 179 vehicles

Additionally, there are no changes to the deductions when it comes to luxury vehicles. They are classified by weight and subject to the same deduction limits.

Section 179 vehicle limitations

The section 170 deduction only applies in the year the vehicle is placed into service. Additionally, your write-off amount is limited by how much you use it for business purposes. You must adjust your deduction amount based on the percentage of time the vehicle is used for business. For example, if you use the vehicle for business 75% of the time, you could claim 75% of the maximum deduction you qualify for.

There are also limitations when it comes to business income. You cannot write off a Section 179 deduction for more than you earn from your business activities. So if you only make a few hundred dollars each month as a rideshare driver, you cannot buy a new car and qualify for the full deduction. You need to earn at least as much as you spend.

However, you can carry over any of the unused deduction into future years. For instance, if you earn $6,000 per year and purchase a $10,000 vehicle, you could calculate your eligible discount and spread it out over the next few years.

How to calculate your Section 179 deduction

Here’s an example of how to calculate a vehicle deduction for Section 179. Say you purchased a sedan in 2023 that qualifies as a light vehicle. You use it for 20 hours a week as an Uber driver but use the same car for your personal errands for about 10 hours each week. That means you use the car for business purposes about 66% of the time.

That means you can only write off 66% of the $12,200 maximum deduction, a total of $8,052. Remember, that’s a deduction, not a tax credit. So you’re not reducing your tax bill by $8,000; instead, you’re lowering your taxable income by that amount. Also, remember that you need to earn at least that much in order to qualify.

How to claim the section 179 write-off

In order to claim a section 179 vehicle write-off, you must fill out IRS Form 4562. Part I pertains to section 179 and gives you lines to list out eligible property placed in service for that tax year. In addition to the vehicle deduction limits, you also have a total section 179 deduction limit for all types of depreciable assets. The maximum is $1,160,000 for 2023 and $1,220,000 for 2024.

The IRS lists four elements of expenditures you must keep records of when taking a Section 179 deduction:

Amount of expenses, such as acquisition costs, maintenance and repair, and lease payments.
The amount of business use for the tax year.
The date of purchase and use.
The business purpose for the expense.