Section 179 on passenger vehicle

7 Replies

Hey everyone,

Stumbled across section 179 while looking for ways to increase my deductions. Anyone familiar with this? My wife and I bought a Ford Edge which is in our names, not the LLC. Will we be able to expense part of it? Would I need to transfer ownership to the LLC?

This is what I was reading..

For passenger vehicles, trucks, and vans (not meeting the guidelines below), that are used more than 50% in a qualified business use, the total deduction for depreciation including both the Section 179 expense deduction as well as Bonus Depreciation is limited to $11,060 for cars and $11,160 for trucks and vans.

Exceptions include the following vehicles:

  • Ambulance or hearse used specifically in your business;
  • Taxis, transport vans, and other vehicles used to specifically transport people or property for hire;
  • Qualified non-personal use vehicles specifically modified for business (i.e. van without seating behind driver, permanent shelving installed, and exterior painted with company’s name).

Limits for SUVs or Crossover Vehicles with GVWR above 6,000lbs
Certain vehicles (with a gross vehicle weight rating above 6,000 lbs but no more than 14,000 lbs) qualify for expensing up to $25,000 if the vehicle is financed and placed in service prior to December 31 and meet other conditions.

Yes, Section 179 expense is one of the best ways to reduce taxes. You do not have to transfer the vehicle to an LLC to claim the deduction - as a matter of fact, if business use is not 100%, it is usually better to keep the vehicle in your name. Keeping the vehicle in your name gives you several options, including setting up an Accountable Plan in which the LLC will reimburse you for your mileage, treating mileage as an Unreimbursed Partnership Expense (assuming the LLC is multi-member), or depreciating the vehicle as an asset and thereby utilizing Section 179.

My recommendation is to consult with a CPA regarding which method will be most advantageous to you.

Love the deduction.  I'll be deducting this $70k+ truck this year and I even deducted the "work camper".

@Lance Lvovsky great lance, thank you. I set up a single member llc. Would I still be able to do as you said with mileage reimbursement?

Also, if I wanted to add my wife to the llc, would this change the way we file taxes?

@Rocky V. Awesome! Nice truck too.. looking to pick up something like that next year

Originally posted by @Joe Wood :

Lance Lvovsky great lance, thank you. I set up a single member llc. Would I still be able to do as you said with mileage reimbursement?

Also, if I wanted to add my wife to the llc, would this change the way we file taxes?

Joe - yes, you can still do mileage reimbursement under an Accountable Plan for a single member LLC. The difference is simply where the deduction is taken on the tax return.

If you add your wife to the LLC (i.e. she becomes a member), then yes, you would be required to file a Partnership Tax Return, Form 1065, as NJ is not a community property state.

For most of my clients, an Accountable Plan is usually the best way to go. This creates tax-free income to the individual, and a deductible expense to the business.

@Lance Lvovsky
So the accountable plan will only be able to expense mileage along with the actual vehicle purchase too? Or is it just which ever yields a greater deduction?

Also, are you familiar with the maximum return for a vehicle purchase? I see if it's under 6000 pounds, it's a certain limit, around 11k I believe.

@Joe Wood Taxpayers can choose either the standard mileage method or actual expenses. If using the actual method, then you can depreciate/179. You cannot use both methods, however. If you use the actual method the first year, you must use that method for the life of the vehicle. If you choose the standard method the first year, you can switch back and forth in future years. Standard mileage method is more popular as it requires less record keeping, and oftentimes, yields better results.

I recommend you consult with a CPA to help you decide which method will yield better results for you.

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