When running a small business with heavy machinery and equipment, saving money and extending your budget is one of the most important things you can do. Every dollar matters and the more you can save, the better off your company will be. While it might come naturally to you to be more frugal on the job site with how you operate and run things, sometimes this requires knowing what options are available to you off the job site as well.
The Section 179 tax deduction is an excellent way to advance your company by getting what you need and saving money. It allows you to write off any heavy machinery, parts and equipment that you purchased for your business in the past year, which can greatly help your bottom line and add more breathing room into your budgets and operations.
But using Section 179 to your advantage isn’t always as easy. Let’s walk through what you can use it for, the equipment that qualifies, the parameters for being eligible and any watchouts that could hinder your return. Not all business owners know how to use it in their best interest, so we want to make sure you get everything possible.
What Is Section 179 Tax Deduction?
The Section 179 tax deduction was first introduced in 1958 to help small businesses grow by investing in capital that will directly influence the company. It allows owners to take the cost of equipment, parts and other pieces of infrastructure off their bottom line by getting returns through tax deductions. That could be hundreds of thousands of dollars in savings, simply by filling out some additional tax forms.
What types of business expenses can I deduct with the Section 179 Expense Deduction?
There are a few different ranges and limitations to what you can deduct with the Section 179 tax break. For example, in 2024, vehicles must be used for business expenses at least 50% of the time and be purchased as new, used or leased. You can also deduct the cost of a vehicle if you use it to drive to and from a job site or deliver work-related items to a customer, vendor or other colleague. Here’s a list of vehicles that qualify for a full deduction in tax year 2024:
Vehicles With a Full Deduction:
Here are the vehicles eligible for a full deduction under tax code section 179.
- Heavy construction equipment such as excavators, skid steers, dozers, pavers, farm machinery, forklifts, etc.
- Vans, with nine or more seats and an area closed off from the driver.
- Ambulances and medical vehicles, including hearses.
- Delivery trucks and any vehicle used to bring equipment to customers.
Vehicles That Qualify for a Partial Tax Deduction:
While some vehicles allow you to deduct their entire cost, others only qualify for a partial deduction. Here are a few examples:
- Trucks and heavier vehicles like pickups and SUVs between 6,000 and 14,000 lbs. Note, to be qualified as a truck, it must have a cargo bed that is eight feet or longer. Additionally, Heavy SUVs have a max deduction of $30,500 for tax year 2024.
Section 179 Calculator: How Much Can I Deduct or Save For My Business with Section 179?
While tax deduction 179 allows you to save money, there is a limit to what you can take off. One of the features of the tax code is the ability to get a depreciation bonus from your vehicles, not only the purchasing cost. This allows you to save even if you didn’t purchase a vehicle in the calendar year 2024. Let’s run through the monetary limits that come with deduction Section 179 so that you can be prepared and budget accordingly.
Deduction Limits for Section 179 For Calendar Tax Year 2024
Here are the deduction limits for the 2024 tax year. Consult your accountant or financial planner if you have any additional questions.
Deduction Limit – $1,220,000. This is the total amount of money that you can write off for your business in 2024. If your purchase amount exceeds that $1,220,000 threshold, you’ll only receive tax breaks up to that limit. You can get a 60% depreciation bonus on the existing amount up to $48,000.
Spending Cap on Equipment Purchases – $3,050,000
2024 Bonus Depreciation – 60%: You can get back 60% of the depreciation amount on vehicles up to $48,000.
Consult Your Financial Planner or Tax Advisor to Take Advantage of Tax Section 179
Section 179 is an excellent way to save money for your business and put money back into the company. Talk to your financial advisors or accountants to get more money for your business.