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Tax Deductions for Heavy Vehicles

Linzi Martin

A majority of U.S. companies invest in heavy vehicles to operate their businesses. They rely on these trucks, SUVs, and vans to transport goods from production to the consumer. Take Amazon, for example. Could you imagine a world nowadays where those dark-gray delivery trucks weren’t trolling through your neighborhood? It goes without saying that these heavy-duty vehicles play an integral role in creating happy customers and prospering businesses.

And though taxpayers see heavy vehicles by the dozen, particularly on highways and busy shopping centers, some aren’t aware that these trucks are one of the biggest investments that business owners make. Not to mention, until recently, there were very minimal tax breaks on trucks of this stature and size. But now, thanks to the new tax law, heavy vehicles are granted huge depreciation deductions throughout 2022.

How much can you write-off for a commercial vehicle?

For passenger vehicles, the IRS sets annual limits on how much you can deduct through depreciation. We break down those IRS restrictions in our guide to the new tax law. But what about heavy vehicles? Do they get treated the same? In contrast to passenger vehicles that are used for business purposes, heavy vehicles (that are more than 6,000 pounds loaded gross weight) are eligible for a different kind of deduction. With the amended changes to the new tax law, companies have two options for heavy vehicle tax deductions:

  • Bonus depreciation
  • Section 179

Before TCJA went into effect, bonus depreciation would generally vary by tax year. However, the new tax law made it possible for companies to depreciate the full cost of an expensive heavy vehicle in a single year. This development is rare and frankly an ideal time for business owners to invest in vans and trucks for business use. The other option (Section 179) is a set amount distinguished by the IRS. The new tax law also improved this tax deduction for business owners.

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Does the 2022 tax year have bonus depreciation?

This is the last tax year to deduct 100% of heavy vehicles. The IRS plans to phase out bonus depreciation by 2026, with deduction percentages decreasing each year until then. Because passenger automobile deductions don’t apply to heavy vehicles, companies can take full advantage of bonus depreciation when you purchase a vehicle for business. Essentially, you can deduct 100% of the cost in one year of ownership, as long as you use the vehicle only for business purposes. If you’ve been wanting to buy a heavy vehicle, essentially now’s your chance.

What qualifies as Section 179 deduction?

The Section 179 deduction applies to tangible personal property such as machinery and equipment purchased for use in trade or business, and if the taxpayer elects, qualified real property, according to the IRS. The Tax Cuts and Jobs Act increased the maximum expense deduction from $500,000 to $1 million, but limitations still apply for heavy vehicles. And so, business owners can only deduct $25,000 for trucks and other heavy vehicles. With this information, it’s apparent the bonus depreciation is still the better option for your 2022 tax filing.

Do I need to track mileage?

Yes! To qualify for the bonus depreciation or Section 179 deduction, you must show substantial evidence that your company uses heavy vehicles more than 50 percent of the time. This is true for the full five-year depreciation period that applies to any business vehicle. By chance you dip below the 50 percent mark, you’ll end up having to pay back your bonus depreciation. As a business owner, this is something to be conscious of as you navigate logistics for the year.

In any case, it’s important to track your business mileage. Whether you choose the bonus depreciation or Section 179, you’ll want records of your business drives in the event that you’re audited by the IRS. By far the best way to avoid inconsistent reporting is to invest in a mileage tracking application. With MileIQ, companies can keep contemporaneous logs of all business drives and receive comprehensive reports that comply withIRS standards.

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