Section 179 – Tax Depreciation and Bonus Depreciation

Capital Equipment Planning 2019

As 2019 winds down, businesses nationally are looking for opportunities to maximize tax advantages through equipment depreciation and capital investment.  Section 179 of the US Tax code doesn’t have to be complicated. We’ve broken down a few of the details to help you navigate the next steps.  

The Tax and Bonus Depreciation code, Section 179, allows your business the flexibility of deducting the full purchase price on qualifying equipment from your gross income when purchased between January 1, 2019, and December 31, 2019.  Work vehicles used in your business or vehicles that are used over 50% for the business may qualify. (We’ve got more details on which vehicles are allowed below).

Owning a business means that you are strategically taking advantage of all opportunities for growth and investment.  Cycling equipment and scaling fleets at the right time with the right intention can save your business cash while maximizing on deductions from your gross income.  This means you keep more of your gross income, while still investing in your company. 

This deduction is available whether you purchase the vehicle outright, or you lease or finance your vehicle through Trans Lease.

The Section 179 Guidelines for 2019

For 2019 your deduction limit is $1,000,000.00 which can be applied to new or used equipment, however, you must put your unit into service before the last day of 2019.  

Designed especially for small businesses like yours, the incentive spending cap on equipment purchases for 2019 is $2,500,000.00.

Your equipment bonus depreciation for 2019 is capped at 100%, which again can be used on new or used equipment typically after the cap of $2.5m is reached.  

There are a few details you need to keep in mind to steer clear of any issues.  

  1. The vehicles only need to be “new-to-you”, so new or used it’s all the same, however, they must be titled in the company name (not yours!) and obtained through an “arms-reach” transaction.  Typically, this means they have been financed with certain qualified loans. Your Trans Lease representative is here to help guide you, make sure you use them.
  2. Finally, if you purchase a vehicle at the beginning of the year for personal use, then change its purpose to business use later to qualify for the deduction, don’t.  It won’t.  

Which vehicles are allowed per Sect 179?

If your vehicle is a true “work vehicle” it will always qualify.  If it’s used for hauling people, seating 9 or more, like shuttles and buses, it qualifies.

If your vehicle has a fully enclosed driver’s compartment (cab) with zero seating behind the driver’s seat and does not have a body section protruding more than 30 inches ahead of the windshield (think cargo van) then it qualifies.

Heavy construction equipment will always qualify, including those units used over the road.

The code gets a bit trickier in the car, truck, and van categories. In qualified business use,  your total deduction amount for both expense deduction and bonus deduction is $11,160 for cars and $11,560 for trucks and vans.

As always, tax codes can be tricky.
Check with your tax advisor for specifics relating to your business.  Read the full US Tax Code description here.  Ask questions, then ask some more!

When you’re ready to make the move, reach out to your Trans Lease rep and secure your lease or loan first.  This gives you the advantage of knowing your terms prior to shopping.

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