What is section 179?
Section 179 is a tax deduction that allows taxpayers, other than trusts and estates, to elect to expend a specified amount of the cost of qualifying property purchases for use in a business. Office furniture, qualifying vehicles, computers, and off-the-shelf software are typically considered deductible expenses. This can help with your sealcoating business as it can allow for tax deductions on the sealcoating equipment you bought that year, saving money and lowering costs. Section 179 allows businesses to deduct the total purchase price of qualifying equipment financed during the tax year. If you buy or lease a piece of qualifying equipment, you can deduct the FULL PURCHASE PRICE from your gross income.
How do I qualify for section 179?
To qualify for section 179 deduction, your property needs to have been acquired for use in your trade or business. Property acquired only to produce income, such as investment property or rental property (if renting property is not your trade or business), and property that produces royalties do not qualify. Additionally, the asset that you are trying to claim the deduction for needs to be tangible (physical property), must be purchased (not leased), and must be used for more than 50% of your business (cannot be used for personal use).
What vehicles qualify for a complete Section 179 deduction?
- Heavy construction equipment
- Tractor-Trailers
- Vehicles with a fully enclosed driver’s compartment and no seating behind the driver’s seat
- Vans that can seat nine or more passengers
- Heavy SUVs, pickups, and vans over 6000 lbs.
- Typical work vehicles without personal use
Limitations of Section 179
The tax deduction is also limited to a business’s annual net income. In other words, you can only deduct what you made. For example, if you had a net income of 100k that year but purchased 120k worth of equipment, the deduction would be limited to 100k. One remarkable thing about the deduction is that if you missed out on $10,000 worth of deductions because you needed to make more money, the deduction can be carried forward to the next year as long as your net income allows it.
How to claim Section 179
Gather Documentation
Collect all relevant documentation related to the vehicle; this includes purchase receipts, vehicle specifications (such as GVWR or Gross Vehicle Weight Rating), and any other documentation to prove the equipment/vehicle is used for business use.
Calculate Depreciation
Use IRS form 4562 to calculate the qualifying equipment/vehicle depreciation deduction. This form is essential for accurately claiming the deduction.
Complete Form 4562
Fill out IRS Form 4562, providing all necessary information and your tax return to claim the deduction.
Review for Accuracy
Before you submit your form, double-check all information and calculations to ensure that everything is 100% accurate. Any discrepancies can result in complications and delays with receiving your deduction.
Seal-Rite and Section 179
Seal-Rite’s high-quality American-made trailers qualify for Section 179 tax reductions. This can be a massive advantage for veteran and beginner seal coaters and an incentive to buy new trailers/units before the end of the tax season to receive the deduction.