What are the first-year depreciation implications for trucks over 14,000 pounds when the Section 179 deduction is applied?
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For tax year 2025, the first-year depreciation implications for trucks with a gross vehicle weight rating (GVWR) over 14,000 pounds, when the Section 179 deduction is applied, are as follows:
1. Section 179 Deduction Eligibility and Limits
- Eligibility: Trucks over 14,000 pounds GVWR are considered "heavy trucks" and are not subject to the special Section 179 dollar limitation that applies to SUVs (which only applies to vehicles between 6,000 and 14,000 pounds GVWR). Therefore, these heavy trucks are treated as standard Section 179 property, provided they are used more than 50% for business and meet all other requirements (such as being acquired by purchase and not from a related party).
- Dollar Limits for 2025: For tax years beginning in 2025, the maximum Section 179 deduction is $2,500,000, with a phase-out threshold at $4,000,000. These limits apply to the aggregate cost of all Section 179 property placed in service during the year. If the total cost of Section 179 property placed in service exceeds $4,000,000, the deduction is reduced dollar-for-dollar by the excess.
- Business Income Limitation: The Section 179 deduction cannot exceed the taxpayer’s aggregate taxable income from the active conduct of any trade or business during the year. Any disallowed amount due to this limitation can be carried forward indefinitely.
2. Application of Section 179 to Heavy Trucks
- No Special Cap: Unlike SUVs (6,000–14,000 lbs GVWR), which are subject to a specific Section 179 cap ($31,300 for 2025), trucks over 14,000 pounds are not subject to this cap. The full Section 179 deduction limit applies.
- Depreciation Class: Heavy general purpose trucks (over 13,000 pounds actual unloaded weight) are classified as 5-year property under MACRS.
3. Order of Deductions
- Order of Application: Section 179 is applied first, before any bonus depreciation or regular MACRS depreciation.
4. Bonus Depreciation
- After Section 179: After applying Section 179, any remaining basis may be eligible for bonus depreciation. For property acquired after January 19, 2025, bonus depreciation is restored to 100% for qualified property, including heavy trucks with a recovery period of 20 years or less.
- Electing Out: Taxpayers may elect out of bonus depreciation for any class of property.
5. MACRS Depreciation
- If Any Basis Remains: After Section 179 and bonus depreciation, any remaining basis is depreciated under MACRS. For 5-year property, the 200% declining balance method is generally used, switching to straight line when advantageous.
6. Example Calculation
Suppose a business purchases a new truck with a GVWR of 16,000 pounds for $150,000 in 2025, and the truck is used 100% for business:
- Section 179 Deduction: The business may elect to expense up to $150,000 under Section 179, subject to the overall $2,500,000 limit and the business income limitation.
- Bonus Depreciation: If the business does not elect out, any remaining basis after Section 179 (in this case, $0 if the full cost is expensed) would be eligible for 100% bonus depreciation.
- MACRS Depreciation: If any basis remains after Section 179 and bonus depreciation, it would be depreciated over 5 years using the 200% declining balance method.
7. Recapture
If the business use of the truck drops to 50% or less during the recovery period, a portion of the Section 179 deduction may be subject to recapture as ordinary income.
Summary: For trucks over 14,000 pounds GVWR placed in service in 2025, the entire purchase price (up to the Section 179 limit and subject to the business income limitation) may be expensed under Section 179. There is no special Section 179 cap for these vehicles. After Section 179, any remaining basis is eligible for 100% bonus depreciation, and any further remaining basis is depreciated under MACRS as 5-year property. This allows for the possibility of expensing the entire cost in the first year, provided the taxpayer has sufficient taxable income and does not exceed the Section 179 overall limit.
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