As a business owner, getting tax deductions is among the main things you aim to achieve yearly, right? If your business involves some form of transportation and you want to buy vehicles weighing more than 6000 lb., this may be your lucky day!
We’ll take you through the IRS Section 179 Deduction – an Internal Revenue Code that allows you to expense up to $25,000 on vehicles weighing between 6000 and 14,000 pounds. We’ll describe this revenue code and the vehicles that qualify for the tax credit under it.
Let’s get started!
What does the 6000lb tax credit mean?
Internal revenue tax code, Section 179 Deduction allows you to expense up to $25,000 on Vehicles (One year) that weigh between 6000 Pounds and 14,000 Pounds or More in the year they are in service. In addition to the $25,000 deduction, you can take a 50% bonus depreciation on your truck meaning you can deduct an additional $12,500 from your taxes.
This means that if you buy a heavy suv truck that costs $50,000 or more, you will be able to deduct $37,500 from your taxes in the first year alone. If you’re looking for a new truck and want to get the most for your money, then this is one of the best incentives out there.
What is bonus depreciation?
Bonus depreciation is a tax incentive that allows firms to deduct a massive percentage of the purchase price of eligible assets, including motor vehicles, instead of writing them off over the ‘useful life’ of the asset.
This deduction allows your profit to go past the 0 mark to negative, which is different from Section 179, which only allows you to break even. For SUVs weighing more than 6000 pounds, the purchase price can be deducted 100% in the year bought and placed in service.
Note: The percentage is 100% for assets bought after September 27, 2017. For SUVs and other motor vehicles (weighing 6000lb), the $25,000 cap applies.
How Do You Qualify for The 6000lb tax credit?
Wondering whether your vehicle qualifies for the 6000 lb. tax credit? Here are some requirements your vehicle must meet.
- The $6,000 tax credit is available for vehicles that weigh more than 6,000 lbs (gross vehicle weight rating – GVWR). Trucks over 6,000 lbs. can qualify for the full credit ($6,000), while those under can only receive half of it.
- To qualify for the full tax credit, your vehicle must be used primarily for business purposes. This means that if you buy a pickup truck and use it as your personal use and work vehicle, then only half of the cost is eligible for a deduction on your taxes.
On the other hand, if you purchase a truck solely for business purposes, then all of it is deductible from your taxes.
- You must buy or lease an eligible vehicle in or after 2010 (i.e., the model year 2011 or newer). You can also get the credit if you buy or lease an eligible used vehicle after 2010 and before Jan 1, 2020 (i.e., from Jan 1, 2021).
- The vehicle must have at least four wheels and be made primarily for use on public roads. This includes cars, trucks and plug-in hybrids that are certified as having at least 4-kilowatt hours of battery capacity (or have at least two wheels with an electric motor that draws electricity from a battery with at least 4-kilowatt hours of capacity)
- You’ll only qualify for this tax credit if you’ve purchased a plug-in electric vehicle. Under this category, there are three types of vehicles that qualify: all-electric, long-range plug-in hybrid, and plug-in hybrid.
- All electrics– must have a battery capacity of at least 4-kilowatt hours (kWh) and have a maximum speed of more than 62 mph (100 km/h). The EV must also be certified as having a range of at least 30 miles (48 km) on a single charge by the EPA under its five-cycle tests using varying driving conditions and climate controls.
- Longer-range plug-ins– must have a battery capacity of at least 8 kWh and have a maximum speed of more than 62 mph (100 km/h).
- The PLHEV- must also be certified as having a range of no less than 300 miles (483 km) on a single charge by the EPA under its five-cycle tests using varying driving conditions and climate controls.
Vehicles that qualify for the Heavy Vehicle Used Tax Credit program
The Heavy Vehicle Used Tax Credit (HVUT) program is designed to encourage the purchase of new, clean heavy vehicles such as trucks, buses and tractors. The program allows a credit on the federal excise tax for new eligible vehicles.
The credit is available for domestic and imported vehicles that meet the program’s requirements. The following list of vehicles qualify for this program:
- Trucks with a gross vehicle weight rating of more than 8,500 pounds that are used in interstate commerce within the United States;
- Buses with a seating capacity of at least ten passengers used in interstate commerce within the United States;
- Tractors with a power unit having a gross vehicle weight rating of more than 26,000 pounds that are used in interstate commerce within the United States; and
- Semi-tractors with power units with a gross vehicle weight rating of more than 26,000 pounds and used in interstate commerce within the United States.
List of Vehicles 6000 lbs. + that may qualify for the Section 179 deduction
- Audi Q7
- BMW X5, X6
- Buick Enclave
- Cadillac XT5, XT6, Escalade
- Chevrolet Silverado, Suburban, Tahoe, Traverse, Colorado ZR2
- Chrysler Pacifica
- Dodge Durango, Grand Caravan
- Ford Expedition, Explorer, F-150 and larger
- GMC Acadia, Sierra, Yukon
- Honda Pilot 4WD, Odyssey
- Infiniti QX80, QX56
- Jeep Grand Cherokee, Gladiator (depending on model)
- Land Rover Range Rover, Discovery
- Lexus GX460, LX570
- Lincoln MKT AWD, Navigator
- Mercedes-Benz G550, GLS, GLE, Metris, Sprinter
- Nissan Armada, NV 1500, NVP 3500, Titan
- Porsche Cayenne
- Tesla Model X
- Toyota 4Runner, Landcruiser, Sequoia, Tundra
*Keep in mind weights may vary by models. It is always best to ask the dealership for the GVWR before purchasing.
Why is there a tax credit for heavy vehicles?
The heavy vehicle credit is available to business vehicles in the transportation industry, including trucking companies, railroads and shippers of goods. It’s also available to other businesses that use heavy equipment for construction or mining operations.
The credit is designed to encourage small business owners to invest in newer, more fuel-efficient equipment. The credit is available for vehicles weighing over 6,000 pounds that are used on public roads.
The credit can be claimed by the business owners or by an owner-operator who leases the vehicle from you. The credit is based on the useful life of the vehicle: 50% of the incremental cost of a new vehicle compared to an older model (up to a maximum credit of $30,000).
The amount of the credit you qualify for depends on:
- The weight class of your vehicle (6,000 pounds up to 26,000 pounds).
- Whether it’s a new or used vehicle (new vehicles qualify for 100% of the credit).
How much money can I save with the 6000-lb tax credit?
The tax incentive will save you anywhere between $25,000 or 100% of the purchase price. However, it is important to note that several factors will affect the amount of cash you save, including the percentage of the times the vehicle is used for business.
First, your vehicle must be used at least 50% of the time for business to qualify for Section 179 tax incentive. You can then deduct the cost percentage equal to the percentage of business use.
For instance, if you use the vehicle 75 percent of the time for business and 25 percent for personal use, only 75 percent of the total cost will be deducted.
What’s the mileage?
Mileage is another motor vehicle deduction that most motorists often overlook. Unlike bonus depreciation and Section 179, this deduction is unique because it doesn’t factor in how much you spend or the vehicle weight but how much you drive.
Mileage is mainly used when depreciation is not used or when the mileage is a better deduction than depreciation. For instance, you can consider the mileage deduction when you’ve used the vehicle less than 50% for business.
Can I claim mileage on a vehicle that weighs 6,000lbs or more?
You can claim mileage on your business vehicle regardless of its weight. However, if you use your vehicle more than 50% for business, you should use the normal vehicle deduction instead – bonus depreciation or Section 179.
They provide you with very friendly depreciation along with Repairs, Vehicle Insurance, and Fuel, which is more than Mileage Deduction.
Can both new and old vehicles qualify for section 179?
The motor vehicle can be brand new or second-hand (new to you) but must be financed and placed in served (or used in business). As mentioned above, the vehicle must be used at least 50% of the time for business, and only the percentage of the vehicle used for business will be deducted.
More than likely, you can take advantage of the 6000 lb. tax credit for purchasing a hybrid vehicle. Whether your vehicle draws electricity from the grid or is an all-electric model, you’ll probably be able to get your tax credit.
Eligibility may extend to some plug-in hybrids and other alternative fuel vehicles that aren’t necessarily classified as hybrids.
As always, consult with your tax professional to ensure you meet the requirements for any tax deduction including this one.