How Does Section 179 Tax Deduction Work?
Save Thousands on Your Next Business Vehicle Purchase
The Section 179 tax deduction allows businesses to write off the full purchase price of qualifying vehicles and equipment in the year of purchase. Learn how your business can benefit.
What Is the Section 179 Tax Deduction?
The Section 179 tax deduction is a tax incentive designed by the U.S. government to foster growth in small businesses. It lets businesses write off the full purchase price of qualifying vehicles and equipment purchased or financed during the tax year.
Instead of writing off large purchases through depreciation over several years, Section 179 allows you to deduct the entire purchase price from your gross income for the current tax year. This means significant tax savings and improved cash flow for your business right away.
Why Was Section 179 Created?
The U.S. government created Section 179 specifically to help businesses invest in their own potential. Originally developed to support small businesses, this incentive encourages companies to purchase the equipment and vehicles they need to grow, rather than delaying those investments.
Key Requirements
- Equipment and vehicles must be used for business purposes at least 50% of the time
- The asset must be purchased and placed into service during the same tax year you claim the deduction
- Both new and used equipment can qualify, as long as it is "new to you"
- The deduction applies to purchased or financed equipment — leased equipment has different rules
How It Works: A Practical Example
Let's say your business spends $1,300,000 on qualifying equipment and vehicles in 2024:
- Section 179 Deduction: Write off up to $1,220,000 immediately
- Remaining Amount: $1,300,000 - $1,220,000 = $80,000
- Bonus Depreciation (60%): Deduct 60% of the remaining $80,000 = $48,000
- Total First-Year Deduction: $1,220,000 + $48,000 = $1,268,000
- Tax Savings (at 35% bracket): Approximately $443,800
That is a substantial amount of money back in your business's pocket in year one, rather than spread across multiple years of depreciation.
2024 Section 179 Deduction Limits
Deduction Limit
Key LimitMaximum amount you can deduct under Section 179 in 2024
Features
- Up to $1,220,000 deduction
- Applies to new and used equipment
- Must be placed in service in 2024
- Full purchase price eligible
Spending Cap
Phase-out begins when total equipment purchases exceed this amount
Features
- Cap set at $3,050,000
- Deduction reduces dollar-for-dollar above cap
- Fully phases out at $4,270,000
- Encourages small/mid-size business investment
Bonus Depreciation
Additional depreciation on amounts exceeding the Section 179 limit
Features
- 60% bonus depreciation rate in 2024
- Applies to remaining balance after 179
- No spending cap on bonus depreciation
- SUV deduction capped at $30,500
Section 179 vs. Bonus Depreciation
While both Section 179 and Bonus Depreciation allow businesses to accelerate deductions, they work differently:
Section 179 Deduction:
- Has a deduction limit ($1,220,000 in 2024)
- Has a spending cap ($3,050,000)
- You choose which assets to apply it to
- Cannot create a net loss — deduction limited to business income
- Available for new and used equipment
Bonus Depreciation:
- No deduction limit
- No spending cap
- Automatically applies to all eligible assets
- Can create a net operating loss
- Rate decreasing: 60% in 2024, 40% in 2025, 20% in 2026
Best Strategy: Most businesses use Section 179 first (up to the limit), then apply Bonus Depreciation to any remaining eligible costs. Consult your tax advisor to determine the optimal approach for your situation.
Kentucky Section 179 Rules
If your business operates in Kentucky, there are additional state-specific considerations for Section 179:
- Property placed into service on or after January 1, 2020 can qualify for the Kentucky Section 179 deduction
- Kentucky allows a Section 179 deduction of up to $100,000
- The Kentucky deduction is separate from the federal deduction
- Kentucky also conforms to certain federal bonus depreciation rules, but with limitations
Businesses in the Lexington area should work with a local tax professional familiar with both federal and Kentucky tax laws to maximize their total deduction.
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Common questions about the Section 179 tax deduction and how it applies to vehicle purchases.
For the 2024 tax year, the maximum Section 179 deduction is $1,220,000. This means your business can deduct up to $1,220,000 of the total cost of qualifying equipment and vehicles purchased during the year. The spending cap — the maximum amount of equipment you can purchase before the deduction begins to phase out — is $3,050,000.
To qualify, vehicles must have a Gross Vehicle Weight Rating (GVWR) of over 6,000 pounds and be used for business purposes more than 50% of the time. Qualifying vehicles include heavy-duty pickup trucks, full-size SUVs, cargo vans, passenger vans, and other commercial vehicles. Note that SUVs have a separate deduction cap of $30,500 under Section 179.
Yes. Section 179 applies to both new and used equipment and vehicles, as long as the asset is "new to you" — meaning your business has not previously used it. The vehicle must be purchased (not leased) and placed into service during the tax year you are claiming the deduction.
Bonus Depreciation is an additional deduction that applies to the cost of qualifying assets after your Section 179 deduction. In 2024, the Bonus Depreciation rate is 60%. Most businesses apply Section 179 first (up to the $1,220,000 limit), then use Bonus Depreciation on the remaining cost. Unlike Section 179, Bonus Depreciation can create a net operating loss.
The equipment or vehicle must be purchased and placed into service before the end of the tax year (December 31 for calendar-year businesses). You cannot simply order equipment — it must be delivered, set up, and ready for use by the deadline. The deduction is then claimed on your tax return for that year.
Yes. Kentucky allows a separate Section 179 deduction of up to $100,000 for property placed into service on or after January 1, 2020. This state deduction is in addition to the federal deduction, but the limits and rules may differ. We recommend consulting with a Kentucky tax professional to understand how both federal and state deductions apply to your purchase.
For SUVs with a GVWR between 6,000 and 14,000 pounds, the Section 179 deduction is capped at $30,500 for the 2024 tax year. However, you can still apply Bonus Depreciation to the remaining cost above this cap. Vehicles over 14,000 lbs GVWR (such as large cargo vans and trucks) are not subject to the SUV cap.
Important Tax Information
The information provided on this page is for general informational purposes only and should not be construed as tax advice. Section 179 deduction limits, bonus depreciation rates, and eligibility requirements are subject to change based on federal and state legislation.
Quantrell Auto Group does not provide tax, legal, or accounting advice. Please consult with a qualified tax professional or accountant before making any purchasing decisions based on potential tax deductions. Individual tax situations vary, and the actual tax benefit you receive will depend on your specific circumstances, including your business income, filing status, and state of residence.
All figures referenced on this page reflect 2024 tax year limits as published by the IRS. Future tax years may have different limits and rules.
Not all vehicles qualify for the full Section 179 deduction. Eligibility depends on the vehicle's Gross Vehicle Weight Rating (GVWR), how the vehicle is used, and the percentage of business use. Vehicles used for personal purposes more than 50% of the time do not qualify. The $30,500 SUV cap applies to vehicles between 6,000 and 14,000 lbs GVWR that are classified as SUVs. Your tax advisor can help determine which vehicles in our inventory qualify for your specific tax situation.
Ready to Save on Your Business Vehicle?
Our commercial vehicle team can help you find qualifying vehicles that maximize your Section 179 tax deduction. Contact us today to explore your options.