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2022 Tax Code 179 and Bonus Depreciation Guide

Below is our annual guide to Section 179 of the Tax Code for self-employed and business owners who purchase cars. This guide includes eligible vehicles purchased in calendar year 2021.

Section 179 Deduction Vehicle List Tax Code 179

Tax Code 179, a special deduction for equipment written off in the year of purchase, was permanently extended in the 2015 legislation. This was further relaxed with the Tax Cuts and Jobs Act (TCJA) enacted by Congress in December 2017. Starting in 2018, this special deduction allows businesses to write off depreciable assets worth up to $1 million in the year of purchase. This may include new and used machinery, heavy equipment, furniture and fixtures, and certain vehicles, primarily SUVs and pickup trucks.

In addition to the $1 million cap, the rule has some limitations. For example, if you purchased more than $2,500,000 in assets during the year, you would phase out this deduction. Also, you must have positive income, not a net loss for the year. However, if you meet these guidelines, it may be a good idea to bring forward the vehicle you plan to buy next year to 2021 to take advantage of last-minute tax savings. You must purchase the vehicle and have it in service by December 31, 2021 to write off your 2021 taxes.

Dividend depreciation

Another great tax deduction, bonus depreciation, has been made better by the TCJA. Bonus depreciation allows you to deduct a specific percentage of the cost of an asset in the year of purchase. This deduction is allowed even if you have no income and no maximum amount. You can use it for an unlimited number of purchases. This percentage doubles to 100% for assets purchased after September 27, 2017. For assets purchased after this date, the $25,000 cap applies to SUVs and crossovers over 6,000 gross pounds. The use of Section 179 does not apply to Vehicles over 6000 Pounds depreciated using bonuses. Assets eligible for dividend depreciation now include used assets. The 100% bonus depreciation percentage is temporary and is planned to be gradually reduced starting in 2023.

Mileage

Another important car deduction that is often overlooked is the mileage deduction. This is a unique deduction because it doesn’t matter how much you actually spend, but how much you drive. This is the deduction you use if you don’t depreciate the cost of your vehicle. This option is used when mileage deduction is better than depreciation, or when depreciation is not allowed (for example, if you use the vehicle for less than 50% of your business). The mileage rate dropped from 57.5 cents per mile for the 2020 tax year to 56 cents per mile for the 2021 tax year. The calculation is simple: If you drive 10,000 miles for business purposes, you’ll get $5,600 in mileage charges.

This deduction is much easier than keeping track of your gas, oil changes, tire changes, and more. But keep in mind that you can’t reuse mileage deductions, etc. other than spending gas, oil changes, and tire changes. Additionally, if Section 179 or incentive depreciation is used, standard mileage rates cannot be used for any period after depreciation, and actual vehicle expenses (fuel, tires, maintenance, etc.) must be tracked.

Which vehicles are eligible?

Below is a quick reference to some vehicles with over 6,000 pounds of GVWR. There may be others not listed here, I strongly recommend you look inside the driver’s door to verify the gross vehicle weight rating, sometimes equipment and options will take the vehicle over the limit to qualify, on the contrary, the lack of options can keep qualifying vehicle, so do your homework! This is a list of eligible 2021 models, but 99 percent of the time, a 2022 model of the same car will have a higher rather than lower GVWR.

Audi

  • AUDI Q7 & SQ7
  • AUDI Q8 & SQ8

BMW

  • BMW X5 M
  • BMW X5 XDRIVE35I
  • BMW X6 M
  • BMW X6 XDRIVE35I
  • BMW X7 (All models)

Bentley

  • BENTAYGA

Buick

  • BUICK ENCLAVE 2WD
  • BUICK ENCLAVE 4WD

Cadillac

  • CADILLAC ESCALADE 2WD
  • CADILLAC ESCALADE AWD
  • CADILLAC XT5
  • CADILLAC XT6

Chevrolet

  • COLORADO 2.8L AWD
  • SILVERADO C1500
  • SILVERADO C2500
  • SILVERADO C3500
  • SILVERADO K1500
  • SILVERADO K2500
  • SILVERADO K3500
  • SUBURBAN C1500
  • SUBURBAN K1500
  • BLAZER
  • TAHOE 2WD LS
  • TAHOE 4WD LS
  • TAHOE HYBRID
  • TAHOE HYBRID
  • TRAVERSE 2WD
  • TRAVERSE 4WD

Chrysler

  • PACIFICA
  • PACIFICA HYBRID

Dodge

  • DODGE DURANGO 2WD
  • DODGE DURANGO 4WD
  • DODGE GRAND CARAVAN

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