What are the limitations or phase-outs for claiming Section 179 on heavy trucks used partially for business purposes?
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To determine the limitations and phase-outs for claiming the Section 179 deduction on heavy trucks used partially for business purposes in 2025, several key rules and thresholds must be considered:
1. Section 179 Deduction Limits for 2025
- Maximum Deduction: For tax years beginning in 2025, the maximum Section 179 deduction is $2,500,000.
- Phase-Out Threshold: The deduction begins to phase out dollar-for-dollar when the total cost of Section 179 property placed in service during the year exceeds $4,000,000. If the cost of all Section 179 property placed in service exceeds $4,000,000, the deduction is reduced by the excess, and is completely phased out at $6,500,000.
2. Business Use Percentage Requirement
- More Than 50% Business Use: Section 179 can only be claimed if the property is used more than 50% for business in the year it is placed in service. If business use drops to 50% or less in any year during the recovery period, a recapture of the deduction is required.
- Partial Business Use: If the truck is used for both business and personal purposes, only the portion of the cost attributable to business use is eligible for Section 179. For example, if a truck costing $100,000 is used 80% for business, only $80,000 is eligible for the deduction.
3. Income Limitation
- Taxable Income Limitation: The Section 179 deduction cannot exceed the aggregate amount of taxable income derived from the active conduct of any trade or business during the year. Any amount not deductible due to this limitation can be carried forward to future years.
4. Special Rules for Heavy Trucks
- Definition: Heavy trucks are generally those with a gross vehicle weight rating (GVWR) over 6,000 pounds.
- SUV Limitation: For SUVs (including certain trucks) with a GVWR over 6,000 lbs but not more than 14,000 lbs, there is a specific Section 179 deduction cap. For 2025, the maximum Section 179 deduction for qualifying SUVs is $31,300.
- Exception for Trucks: The $31,300 cap does not apply to vehicles that:
- Have a cargo area of at least 6 feet in interior length that is an open area or is designed for use as an open area but is enclosed by a cap and is not readily accessible directly from the passenger compartment,
- Are designed to seat more than nine passengers behind the driver’s seat,
- Or have an integral enclosure, fully enclosing the driver compartment and load carrying device, with no seating behind the driver and no body section protruding more than 30 inches ahead of the windshield.
- Trucks Not Subject to SUV Cap: Most heavy trucks (such as pickups with a cargo bed at least 6 feet long) are not subject to the $31,300 cap and can be expensed up to the full Section 179 limit, subject to the other limitations above.
5. Recapture Rules
- If the business use percentage drops to 50% or less during the recovery period, a portion of the Section 179 deduction must be recaptured as ordinary income in the year of the change.
6. Coordination with Bonus Depreciation
- Section 179 is applied before bonus depreciation. After Section 179 and bonus depreciation, any remaining basis is depreciated under MACRS.
7. Summary of Key Limitations and Phase-Outs for Section 179 on Heavy Trucks Used Partially for Business in 2025
- Maximum deduction: $2,500,000, reduced dollar-for-dollar if total Section 179 property placed in service exceeds $4,000,000.
- Business use must exceed 50%; deduction is limited to the business-use percentage of the truck’s cost.
- Deduction cannot exceed taxable business income; excess is carried forward.
- SUVs (including certain trucks) with GVWR >6,000 lbs but ≤14,000 lbs: $31,300 cap, unless the truck meets specific exceptions (e.g., cargo bed at least 6 feet long).
- Recapture applies if business use drops to 50% or less during the recovery period.
- Section 179 is claimed before bonus depreciation and MACRS.
These rules ensure that the Section 179 deduction for heavy trucks is subject to both overall and vehicle-specific limits, and is further restricted by the extent of business use and the taxpayer’s business income.
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