2023 Tax Code 179 Guide For Self-Employed & Business Owners

Below is our annual guide to Tax Code Section 179 for self-employed and business owners who buy a vehicle. This guide encompasses qualifying vehicles purchased in the 2023 calendar year.

Tax Code 179

Tax Code 179, the special deduction to write off equipment in the year purchased, was extended permanently in 2015 legislation. This has been further liberalized by the Tax Cuts and Jobs Act (TCJA) that Congress enacted in December 2017.

This special deduction allows businesses for 2023 tax year to write off up to $1,160,000 of the cost of depreciable assets if they are purchased by December 31, 2023. This can include new and used machinery, heavy equipment, furniture and fixtures, and certain vehicles.

In addition to the 2023 $1,160,000 cap, there are certain limitations to Section 179.

A few of the limitations and considerations are as follows:

1. If you purchase more than $2,890,000 of assets for the year you will have this deduction phased out. Once the equipment purchased exceeds that amount, the deduction is reduced on a dollar-for-dollar basis.
2. You must have a total overall positive income from all sources, not just the specific business, to take the Section 179 deduction. 
3. The vehicle must be placed in service by December 31, 2023, to take advantage of  the write-off on your 2023 tax return.
4. The vehicle must be used for at least 50% business use.
5. Only the business use percentage of the asset’s cost applies for the Section 179 calculation.

Bonus Depreciation

Another great tax break, Bonus Depreciation, has been made even better by the TCJA. Bonus Depreciation allows you to deduct a specified percentage of the cost of assets in the year of purchase. This deduction is allowed even if you do NOT have an overall taxable income position. Generally, there is no maximum limitation like there is in the Section 179 calculation. As described below, there are a few limitations for specific types of vehicles. For 2023, the provision for the deduction will be 80% of an asset’s cost will be reduced annually by 20% until it expires at the end of 2026.

For assets purchased in 2023 there is $28,900 depreciation cap that applies to SUVs and crossovers with a Gross Weight above 6,000 lbs. Unfortunately, you cannot combine Section 179 depreciation with Bonus depreciation for the same vehicle. However, the good news is that assets eligible for Bonus Depreciation now include newly purchased used assets.

 
Limitations

Keep in mind that vehicles are subject to limitations on any of the depreciation deductions based on business use of the vehicle. The vehicle must be used at least 50% for business to qualify for each method described.

• Small & Luxury Vehicles

Small cars under 6,000 lbs., luxury autos, are capped at $18,200. The IRS has imposed these limits to help discourage the depreciation of high value vehicles.

• Heavy Vehicles

SUVs and crossovers with Gross Weight above 6,000 lbs. are capped at $28,900 if Section 179 is taken. SUVs and crossovers with Gross Weight above 6,000 lbs. do not have a cap if Bonus Depreciation is taken. Pickups and vans with no rear passenger seating that are above 6,000 lbs. also do not have a cap. Every major brand of pickup (1/2 ton and up) is over 6,000-pounds for purposes of this deduction. This includes Ford, Ram, Chevrolet, Toyota, GMC, and Nissan. When you get down to the mid-sized trucks you might be surprised to find that some of these are right on the line. A 2023 Chevrolet Colorado crew cab can be over the weight limit, but the extended cab is not, so it might save enough in taxes to make it worthwhile to upgrade to the bigger size. If Section 179 or Bonus depreciation is used, standard mileage rates cannot be used for any periods after the year depreciation is taken and actual auto expenses (fuel, tires, repairs, etc.) must be tracked going forward.

It should be noted that the above limitation caps discussed above assume 100% business use. If the vehicle drops below 100%, the dollar limits are proportionately reduced.

Mileage

Another great automobile deduction that is often overlooked is the mileage deduction. This is a unique deduction because it does not matter how much you actually spend but matters how much you drive. This is the deduction you use if you are not depreciating the cost of your vehicle. This would be used when mileage is a better deduction than depreciation, or when the depreciation methods described above are not allowed (for example if you used your vehicle less than 50% for business).

The standard mileage rate beginning on January 1, 2023, is increasing to 65.5 cents per mile. This is up from the amount per mile for the second half of the 2022 tax year, which was 62.5 cents per mile. Pay close attention to this important change.

This deduction is much easier than keeping track of your expenses for gasoline, oil changes, tire replacement, etc. Keep in mind, however, that you cannot double dip and use the mileage deduction in addition to expensing your gasoline, oil changes, tire replacement, etc. In addition, if Section 179 or Bonus depreciation is used, standard mileage rates cannot be used for any periods after the year depreciation is taken and actual auto expenses (fuel, tires, repairs, etc.) must be tracked going forward.

Which Vehicles Qualify

Here is a quick reference of some vehicles that are over 6,000-pounds GVWR. There may be others not listed here, I highly recommend you look on the inside of the driver's door to verify the Gross Vehicle Weight Rating, sometimes equipment and options push a vehicle over the limit to qualify, and conversely a lack of options can keep a vehicle from qualifying, so do your homework!

IMPORTANT:  This is the list of 2023 models that qualify, however, in 99% of the cases, the 2024 models of the same vehicle will have a higher, not lower GVWR.

• Audi

  • e-tron
  • Q7
  • SQ7
  • Q8
  • SQ8

• Bentley

  • Bentayga
  • Flying Spur
  • Mulsanne

• BMW

  • iX
  • X5
  • X6
  • X7

• Buick

  • Enclave

• Cadillac

  • XT5
  • XT6
  • Escalade

• Chevrolet

  • Blazer
  • Silverado
  • Suburban
  • Tahoe
  • Traverse

• Chrysler

  • Pacifica

• Dodge

  • Durango
  • Grand Caravan

• Ford

  • Expedition
  • Explorer
  • F-150 through F-550
  • Transit vans

• GMC

  • Acadia
  • HUMMER
  • Sierra
  • Yukon, Yukon XL

• Genesis

  • GV80 3.5T 

• Honda

  • Odyssey
  • Ridgeline 4WD

• INFINITI:

  • QX80
  • QX56

• Jeep:

  • Gladiator Rubicon
  • Wrangler Unlimited
  • Grand Cherokee
  • Grand Wagoneer
  • Wagoneer

• Land Rover

  • Range Rover
  • Defender
  • Discovery
  • Velar
  • Evoque

• Lexus

  • GX460
  • LX570
  • LX600

• Lincoln

  • Aviator
  • Navigator

• LUCID

  • Lucid Air

• Mazda

  • CX90

• Mercedes-Benz

  • G550
  • GLS
  • GLE
  • Metris
  • Sprinter

• Nissan

  • Armada
  • NV 1500
  • NVP 3500
  • Titan

• Ram

  • RAM Promaster 1500-3500
  • RAM 1500 TO 3500

• Rivian 

  • R1T

• Porsche

  • Cayenne
  • Taycan

• Subaru

  • Ascent

• Tesla

  • Model X

• Toyota

  • 4Runner
  • Grand Highlander
  • Landcruiser
  • Sequoia
  • Tundra

• Volkswagen

  • Atlas V6 4Motion
  • ID.4 Pro S AWD

• Volvo

  • XC90