Mitsubishi Fuso Truck of America advises that the U.S. Internal Revenue Code, Section 179 (commonly referred to as IRC-179) allows businesses to expense up to $500,000 in tax year 2017 for certain capital expenditures, including commercial work trucks like the FUSO FE/FG Series.

Normally, capital expenditures must be handled as depreciable assets. However, provisions of IRC-179 allow a taxpayer to elect to treat the cost of qualifying Section 179 property as an expense in the tax year in which the equipment is placed in service, rather than as a depreciable asset charged to a capital account. For qualifying equipment placed in service in a business’s tax year beginning in 2017, the limit is $500,000.

Specific provisions and restrictions do apply, and every business’s tax situation is unique, so business owners should consult their own tax accountants or attorneys to determine how much tax saving, if any, IRC-179 could provide.

Section 179 doesn’t increase the total amount small business owners can deduct, but it allows them to get their entire depreciation deduction in one year, rather than taking it a little at a time over the term of an asset’s useful life—which can be up to 39 years. This is called first-year expensing or Section 179 expensing. (Expensing is an accounting term that means currently deducting a long-term asset.)

EXAMPLE

Before the end of the year, you buy a new $45,000 2017 Mitsubishi Fuso FE130 and use it 100% in your sole proprietorship business. Your first-year depreciation deduction is $37,000: $25,000 Section 179 deduction + $10,000 first-year bonus depreciation deduction [50% x ($45,000 - $25,000)] + $2,000 “regular” depreciation deduction [20% x ($45,000 - $25,000 - $10,000)].

The $37,000 in write-offs will reduce your federal income tax bill and your self-employment tax bill too. You may get a healthy state income tax deduction too, although some states have refused to go along with the super-generous depreciation rules enacted by the federal government.
©Source: Marketwatch.com


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FAQ's

Q. What is the Section 179 deduction?

A. Section 179 of the IRS Tax Code allows a business to deduct, for the current tax year, the full purchase price of financed or leased equipment and off-the-shelf software that qualifies for the deduction.

Q. Can I lease (or finance) equipment and take the Section 179 Deduction?

A. Absolutely. In fact, this is a very effective strategy, as the deduction you take may actually exceed the total loan or lease payments you make for the year.

Q. How do I know if the property I am purchasing or leasing qualifies for the Section 179 Deduction?

A. Most vehicles and equipment that businesses purchase or lease will qualify for the deduction. Please, contact us for a list of qualifying trucks.

Q. Does the date of my purchase have an impact on the Section 179 Deduction?

A. Yes. To qualify for the Section 179 deduction for any given tax year, the equipment must be purchased or leased and placed into service between January 1 and December 31 of that year.