Need advice: Section 179 deduction for Truck

Tax, SDIRAs & Cost Segregation
5yFollow

Need advice: Section 179 deduction for Truck

Nathan GesnerBusiness Member
Moderator
Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes

I need to spend some money and cut down on taxes. CPA advises I purchase a vehicle so I'm curious about the advantages and I'm very short on time because it has to be done by December 31st.

I understand what type of vehicle qualifies. Let's assume my company purchases a qualified truck for $50,000 and puts it into service on December 31st. As I understand it, Section 179 allows a maximum deduction of $25,000 for this type of vehicle. However, I can also use bonus depreciation and effectively write off the entire purchase amount of $50,000. 

If we're in the 24% tax bracket, deducting the $50,000 would save me $11,000 in taxes which means I've essentially purchased the truck for $39,000.

Any advice? Am I missing anything? Would there be better benefits if I were to lease the vehicle or spread the standard depreciation over a period of five years?

Any recommendations on a Truck? I'm leaning towards the F-150.

The DIY Landlord Book4.7247 Reviews
WebsiteView Page
0Reply
52 views

Most Popular Reply

Michael PlaksPro Member
Tax Accountant / Enrolled Agent · Houston, TX · Member since 2014 · 5k+ posts · 6k+ votes
5y

@Nathan Gesner

Starting point: do you need a new truck now? Because if the answer is "not really" then it should be the end of the conversation.

If you do, then you also should know what kind of truck you need.

Assuming that you use your truck 100% for business (unlikely unless you drive another vehicle for personal needs) then yes, you can write off the entire truck now. 

Disadvantage 1: you will not be able to use mileage deduction in the future. You will have to track and deduct the actual expenses: gas, insurance, maintenance etc. If you drive a lot of miles, you will be sacrificing your future deductions.

Disadvantage 2: once you sell it or trade it in, the entire sales price or trade-in allowance will become taxable income, partially reversing your benefits of this year.

3Reply
See this reply in the discussion

4 Replies

Jump to latestLatest
  • Michael PlaksPro Member
    Tax Accountant / Enrolled Agent · Houston, TX · Member since 2014 · 5k+ posts · 6k+ votes
    5y

    @Nathan Gesner

    Starting point: do you need a new truck now? Because if the answer is "not really" then it should be the end of the conversation.

    If you do, then you also should know what kind of truck you need.

    Assuming that you use your truck 100% for business (unlikely unless you drive another vehicle for personal needs) then yes, you can write off the entire truck now. 

    Disadvantage 1: you will not be able to use mileage deduction in the future. You will have to track and deduct the actual expenses: gas, insurance, maintenance etc. If you drive a lot of miles, you will be sacrificing your future deductions.

    Disadvantage 2: once you sell it or trade it in, the entire sales price or trade-in allowance will become taxable income, partially reversing your benefits of this year.

    3Reply
  • Ron Singh
    CA · Member since 2014 · 244 posts · 47 votes
    4y

    @Michael Plaks

    Great points, also how about tax deduction recapture.

    say you take 100% deduction using 179 this year, would next year tax deduction recapture would start, how the calculation works ?

    0Reply
  • Andrew C.
    Investor · SE Wisconsin · Member since 2019 · 111 posts · 71 votes
    4y

    "I can also use bonus depreciation and effectively write off the entire purchase amount of $50,000." 

    I believe it has to be > 6K lbs to qualify for that. Which excludes the non-electric F150.

    Batteries are heavy, hence electrics are easy to qualify by weight (need a TeslaX?  :P )

    I'm a bit bummed the eF150 can't be ordered and delivered in time. I'd pull the trigger if they were, even though my general guidance is not to buy anyone's first-gen electric.

    0Reply
  • Michael PlaksPro Member
    Tax Accountant / Enrolled Agent · Houston, TX · Member since 2014 · 5k+ posts · 6k+ votes
    4y
    Quote from @Ron Singh:

    @Michael Plaks

    Great points, also how about tax deduction recapture.

    say you take 100% deduction using 179 this year, would next year tax deduction recapture would start, how the calculation works ?


    179 depreciation recapture happens when your business use drops below 50% or when you get rid of the truck. Then the entire sales price becomes ordinary income.

    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free