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Writing Off A Car For Business With The Section 179 Deduction

Buying a car is a huge expense, but it’s a necessary one. So much of our lives is lived behind the wheel, driving to work or classes, getting the kids to their games, going on dates or heading out on a road trip.

As a self-employed individual, freelancer or independent contractor you can claim tax deductions for your driving expenses that can substantially lower your taxes. If you own a car and use it for business purposes, you can deduct mileage and car-related expenses as a business deduction.

Say you bought a car to drive for Uber. You can start deducting maintenance costs like oil changes, part of your cellphone bill, your subscription to Spotify for playing music for customers, parking and tolls.

If you want your car to last, you’ll need to shell out a significant chunk of money on its upkeep. Plus, gas prices aren’t getting any lower so it’s a good thing you can use the Section 179 deduction to write off your vehicle purchase.

We’ll cover topics from what is the Section 179 deduction, the Section 179 deduction list for 2023, how to use bonus depreciation to get a bigger tax deduction and how to write a car off for business using vehicle mileage.

What does Section 179 cover?

The Section 179 tax deduction was introduced as a federal incentive for small and midsize businesses to depreciate their assets in the same year it was put to use. It includes vehicles (both new and used) that meet certain requirements, such as:

  • 🛻 Pickups and vans used for business more than 50% of the time and exceed 6,000 pounds gross vehicle weight. These vehicles may qualify for at least a partial Section 179 deduction, plus bonus depreciation.
  • 🚜 Vehicles used for work and cannot double as personal vehicles, such as forklifts or trailers, or those that seat more than nine passengers behind the driver’s seat such as hotel or airport shuttle vans.
  • 🚚 Delivery-type vehicles, such as cargo vans or box trucks with no passenger seating.
  • 🚑 Specialty work vehicles such as hearses or ambulances.

Section 179 deduction vehicle list for 2023

Unlike the Section 179 deduction in 2022, the list for the 2023 tax year was updated to include more vehicles like:

  • Audi: Q7, SQ7, Q8, SQ8
  • BMW: X5 xDrive45e, X6 M50i, X7 xDrive40i, X7 M50i, X7 M50d
  • Bentley: Bentayga, Bentayga Hybrid, Bentayga Speed, Flying Spur, Flying Spur V8, Flying Spur W12, Mulsanne, Mulsanne Speed, Mulsanne Extended
  • Buick: Enclave Avenir AWD, Enclave Avenir FWD, Enclave Essence AWD, Enclave Essence FWD
  • Cadillac: Escalade, Escalade ESV, Escalade Platinum, Escalade ESV Platinum
  • Chevrolet: Silverado 2500HD, Silverado 3500HD, Silverado 4500HD, Silverado 5500HD, Silverado 6500HD, Express Cargo Van 2500, Express Cargo Van 3500, Express Passenger Van, Suburban, Tahoe, Traverse
  • Chrysler: Pacifica
  • Dodge: Durango, Durango SRT, Durango Citadel, Durango R/T, Durango GT, Durango SXT, Grand Caravan
  • Ford: Expedition, Expedition MAX, F-250 Super Duty, F-350 Super Duty, F-450 Super Duty, F-550 Super Duty, Transit Cargo Van T-250 HD, Transit Cargo Van T-350, Transit Passenger Wagon
  • GMC: Sierra 2500HD, Sierra 3500 HD, Sierra 3500HD Denali, Sierra 4500HD, Sierra 5500HD, Sierra 6500HD, Yukon, Yukon XL
  • Honda: Odyssey
  • Infiniti: QX80
  • Jeep: Grand Cherokee, Grand Cherokee SRT, Grand Cherokee L, Wrangler Unlimited, Gladiator Rubicon
  • Land Rover: Defender 110, Defender 90, Discovery, Discovery Sport, Range Rover, Range Rover Sport, Range Rover Evoque, Range Rover Evoque R-Dynamic
  • Lexus: LX570
  • Lincoln: Aviator, Navigator
  • Mercedes-Benz: GLS 580 4MATIC, GLS 600 4MATIC, G 550 4x4 Squared, AMG G 63 4MATIC SUV
  • Nissan: Armada 2WD/4WD, NV 1500 S V6, NVP 3500 S V6, Titan 2WD S
  • Porsche: Cayenne Turbo Coupe, Cayenne Turbo S E-Hybrid Coupe, Cayenne S-E Hybrid, Panamera Turbo S E-Hybrid
  • Tesla: Model X
  • Toyota: Tundra 2WD/4WD, 4Runner 2WD/4WD LTD, Tundra 2WD/4WDYou can always get an expert tax pro to help figure out the Section 179 deduction for vehicles.

What is the Section 179 deduction for 2023?

For the 2023 tax year, businesses can deduct up to $1,160,000 under Section 179. If they spend more than $2,890,000 on eligible equipment, the deduction begins to phase out on a dollar-for-dollar basis. This is an increase from the Section 179 deduction from 2022 which was $1,080,000 and was capped at $2,700,000.

How does depreciation work under Section 179?

Depreciation refers to the annual deduction authorized to recover the cost or other basis of business or investment property having a useful life substantially beyond the tax year. Generally, depreciation starts when you first use the property in your business or for the production of income. It ends when you take the property out of service, deduct all your depreciable costs or no longer use the property in your business or for the production of income.

However, with the Section 179 deduction, you can write off the entire cost of the purchase in the first year, rather than depreciating it over its functional life. You can also take the bonus depreciation in 2023 as an additional deduction.

So, how does it work? First, you apply the 179 tax deduction on your vehicle and then calculate bonus depreciation (80% of the cost of the asset for 2023) on the remaining cost. A Section 179 deduction calculator is an easy way to calculate this.

Where should I report the Section 179 deduction?

As a business owner, gig worker, or self-employed person, you must use Form 4562 to report your Section 179 deductions.

How else can I write a car off for business?

If you drive a lot for work, then vehicle depreciation isn’t the only way to deduct car expenses, you can also choose to use the standard mileage method. In 2023, the standard mileage was set at 65.5 cents per mile.

All you have to do is track your vehicle mileage and multiply it by the IRS standard rate to get your 1099 tax deduction. This method is pretty simple and includes most of your car expenses, including depreciation.

You can also choose to use the actual expenses method, which requires much more expense tracking and record keeping. You’ll need to calculate the business use percentage of your vehicle for this. With this method, you can deduct parking, tolls, repairs and maintenance, tires and depreciation.

FlyFin’s expert CPA team can help you figure out whether the 179 tax deduction is the best option for you. A.I. can also find all your business deductions to lower self-employment taxes by scanning your expenses.

The Section 179 deduction is a valuable write-off for vehicles, even if it can get complicated. As long you do research into the eligibility rules and keep all your records straight, you should be able to take this deduction without worrying about the IRS.

FlyFin CPA Team

FlyFin CPA Team

With a combined 150 years of experience, FlyFin's CPA tax team includes tax CPAs, IRS Enrolled Agents and other tax professionals, offering users the most comprehensive tax advice and preparation.

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