As the tax year of 2024 is here, it’s important for businesses to carefully consider how to invest in their assets, especially when it comes to company vehicles.
A company’s finances can get a lot better if they understand and use tax breaks like Section 179 and Bonus Depreciation. This article gives you a full guide on how to get the most out of these tax breaks.
Understanding Section 179 and Bonus Depreciation
Businesses can deduct the full cost of qualified equipment, such as heavy vehicles, from their taxable income in the year they were bought, thanks to Section 179 of the IRS tax code.
Bonus Depreciation, on the other hand, lets you write off a portion of the cost of new equipment in the first year it’s used. For 2024, the depreciation deduction is set at 60% for vehicles cost for vehicles with a gross vehicle weight rating (GVWR) of over 6,000.
Key Advantages for Business Vehicles
– Section 179 Benefits for Heavy Vehicles: Section 179 gives additional deduction for heavy vehicles with a GVWR of between 6,000 and 14,000 pounds. Businesses can write off up to the deduction limit, subject to annual inflation adjustments.
– Enhancing Savings with 60% Bonus Depreciation: This allows an additional 60% deduction of the vehicle cost in the first year, complementing the standard depreciation.
Combining Section 179 and Bonus Depreciation
Using both tax breaks to get the most out of them is part of a smart plan. For example, if you buy a new heavy-duty car, you can get a full Section 179 deduction, and the 60% bonus depreciation can be used on any remaining basis.
Who Benefits the Most?
Section 179 typically benefits small and medium-sized businesses due to its spending cap and immediate expenses.
On the other hand, Bonus Depreciation is advantageous for larger businesses with significant new asset expenditures, offering flexibility and substantial tax relief.
Strategic Tax Planning
To make good use of these benefits, you need to know what your business needs and how much money it has.
Consider factors such as:
– Business income and taxable profit.
– The proportion of business use for the vehicle.
– Long-term asset management strategies.
Businesses that buy trucks and equipment in 2024 may find it very helpful to know about Section 179 and Bonus Depreciation when it comes to taxes. It’s about making smart decisions that fit with the growth path and financial goals of your business.
Talk to a tax expert who can help you figure out your unique situation for personalized advice and a detailed plan made just for your business.