Can bonus depreciation be used in addition to the Section 179 deduction for trucks over 14,000 pounds, and how does this affect total first-year write-offs?
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Yes, bonus depreciation can be used in addition to the Section 179 deduction for trucks over 14,000 pounds, and this combination can significantly increase the total first-year write-off for such vehicles. Here’s a detailed explanation of how these provisions interact and the effect on first-year deductions for 2025:
1. Section 179 Deduction for Heavy Trucks (Over 14,000 Pounds)
- Eligibility: Trucks with a Gross Vehicle Weight Rating (GVWR) over 14,000 pounds are not subject to the Section 179 “SUV cap” (which is $31,300 for 2025). This means the full Section 179 deduction limit applies, subject to the overall annual cap and phase-out thresholds.
- Limits for 2025: The maximum Section 179 deduction is $1,250,000, reduced dollar-for-dollar if total Section 179 property placed in service exceeds $3,130,000 in the year. The deduction is also limited to the taxpayer’s aggregate taxable income from the active conduct of all trades or businesses for the year. Any unused amount can be carried forward to future years.
2. Bonus Depreciation (IRC §168(k))
- Eligibility: Trucks over 14,000 pounds are considered “qualified property” for bonus depreciation, provided they are new or used, acquired and placed in service according to the rules in IRC §168(k).
- Order of Application: Section 179 is applied first, reducing the basis of the property. Bonus depreciation is then applied to the remaining basis. Any remaining basis after Section 179 and bonus depreciation is depreciated under MACRS.
- Bonus Depreciation Rate for 2025: For property acquired after January 19, 2025, the bonus depreciation rate is 100% (per the One Big Beautiful Bill Act, H.R. 1, effective for property acquired after this date). For property acquired before this date, the rate is 40%.
3. Combined Effect: Maximizing First-Year Write-Off
Step-by-step:1. Apply Section 179 deduction up to the cost of the truck, subject to the annual and income limits.2. Apply bonus depreciation (100% for property acquired after January 19, 2025) to the remaining basis after Section 179.3. Depreciate any remaining basis (if any) under MACRS (typically 5-year property for trucks).
Example (2025, property acquired after January 19, 2025):- Truck cost: $150,000- Section 179 deduction: $150,000 (assuming sufficient taxable income and not exceeding the annual cap)- Remaining basis: $0- Bonus depreciation: $0 (since basis is fully expensed)- Total first-year deduction: $150,000
If the truck cost exceeds the Section 179 limit or the taxpayer’s taxable income, bonus depreciation can be used on the remaining basis. For example, if the truck cost $1,500,000 and the taxpayer’s Section 179 limit is $1,250,000, the remaining $250,000 would be eligible for 100% bonus depreciation, resulting in a total first-year deduction of $1,500,000 (assuming no other limitations apply).
4. Recordkeeping and Substantiation
- The IRS requires detailed records to substantiate the business use and eligibility for these deductions, including purchase documents, proof of GVWR, and contemporaneous mileage logs.
5. Key Considerations
- Business Use Requirement: The vehicle must be used more than 50% for qualified business use in the year placed in service.
- No “Luxury Auto” Cap: Trucks over 14,000 pounds are not subject to the annual “luxury auto” depreciation caps that apply to lighter vehicles.
- Recapture: If business use drops to 50% or less during the recovery period, recapture of excess depreciation may be required.
In summary: For trucks over 14,000 pounds, you may combine Section 179 and bonus depreciation in 2025. Section 179 is applied first (up to the annual and income limits), and then 100% bonus depreciation is applied to any remaining basis (for property acquired after January 19, 2025). This allows for a full first-year write-off of the truck’s cost, subject to the applicable limits and substantiation requirements.
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