People consider many things before buying their ride, and an important one is whether the vehicle you’re eyeing for qualifies for a tax break under Section 179 of the US tax code or not.
The US government has brought Section 179 to help businesses evade some tax restrictions on purchasing any new equipment. This can significantly benefit businesses, allowing them to save on taxes and get more use out of their vehicles. So, if you are interested in a new car—or any other type of qualifying equipment—it’s worth taking a closer look at Section 179 to see if you can take advantage of these tax savings.
In this article, we’ll delve deeper into answering common questions about Section 179 and G Wagons and help you determine whether or not your new ride qualifies for this valuable tax break.
What Is Section 179 in the US?
Businesses operate on a vast scale and must purchase various goods to keep the office running. These items range from simple software and hardware products to properties and vehicles. Section 179 is a tax provision the United States Government introduced under the Tax Reform Act of 1978.
The principal idea behind its introduction has stayed the same, despite its multiple amendments over the years. The US government intends to provide relief to the businesses so that they can invest more in other domains. This would result in collective welfare and the growth of the entire industry.
Businesses can also enjoy this tax evasion on the purchase of vehicles for their professional use. Some notable vehicles that already qualify for this section include The Ford F-150, Toyota Tundra, and Chevrolet Silverado.
The G Wagon is also a popular choice for businesses in the US, thanks to its combination of luxury and performance. It is perfect for executives who need to make a statement or for businesses that need a vehicle that’s both reliable and stylish. But is it eligible for section 179? Before diving straight into the answer, it is crucial to know in and outs of this section. Only then can we decide the answer.
Salient features of Section 179
Under section 179, businesses and professional firms can deduct the total purchase price of qualifying equipment or software from their gross income. Hence, they can write off the whole cost at once instead of depreciating it over multiple years like many other money-saving tax deductions.
Qualifying property includes new or used equipment, vehicles (including G Wagons), and specific software packages. Remember, though, that even if something is compatible with professional or business use, it doesn’t necessarily mean it will qualify for the deduction; there are specific criteria that must be met.
In addition to its flexibility, this tax break is also retroactive, meaning any purchase made in the current tax year—between January 1 and December 31—can be written off for up to $1 million as long as all eligibility requirements are met.
Any purchase is eligible for section 179 if it fulfills the following conditions:
· Has a physical nature: Businesses can only benefit from section 179 if what they are purchasing is a tangible good. It includes furniture, computer software, and of course, vehicles. Non-tangible assets, including copyrights and patents, are not covered by section 179.
· No Lease: Section 179 is not compatible with leased vehicles. Businesses have to purchase vehicles to enjoy the benefits offered by section 179.
· Nature of use: A vehicle is not eligible for tax evasion if it is used for personal use rather than professional use. Therefore, businesses must employ vehicles for office purposes.
· Not bought from a known party: Any vehicle that is bought from a known party, including siblings, spouses, relatives, and organizations with which you have a relationship, is not eligible for section 179.
· Gross Weight Rating: Passenger vehicles should weigh more than 6000 pounds to qualify for the tax credit.
What Is a G Wagon?
Mercedes Benz G Class is also referred to as the G-Wagon by automotive lovers. The “G” in the vehicle is short for a German word that translates to “cross-country vehicle.” It is a luxury off-road vehicle that has become a status symbol now. Mercedes originally designed and produced it for military use since its rugged and sporty design could provide performance like no other jeep could.
Mercedes unveiled the first member of this class in 1979, and since then, it has gone various improvements to make it better in terms of power and safety. The most essential upgrade took place in 2002, which marked the introduction of a V8 engine, leather seats, and a sunroof into the G-500. There are two unique versions, the G 63 AMG and the G 65 AMG. The G 63 AMG houses a twin-turbocharged V8 engine that is sure to turn most of the heads while driving. The G65 AMG takes a leap further and comes with a twin-turbocharged V12 engine. Insane!
G-Class has made its name in the history books due to its rugged design, versatile approach, classic outlook, and iconic performance. It has cemented its place as a military and civilian vehicle, and it is highly sought after by businesses due to its combination of luxury and capability.
Does a G Wagon Qualify for Section 179 in the US?
A G-Wagon can or cannot qualify for Section 179. It depends on what the buyer intends to use it for. It is not meant for individual buyers, and instead the purchase should be under the name of any business or firm. But we lay down a general framework on how it can qualify for the tax incentive under section 179.
· Used in a professional capacity: A G-wagon is suitable for both consumer and professional use. But section 179 covers it only if it is used for official and professional purposes more than 50% of the time. It can include transporting goods, traveling to have a meeting with clients or running errands for the business.
There are a few ways to keep a check on the business use of the vehicle. One is a manual way of keeping a detailed log of mileage and the purpose of each trip made through the vehicle. The other more straightforward method is to employ the Standardized Mileage Rate set by IRS. This shows the average cost of operating a vehicle for professional use.
· Bought and not leased: Businesses must buy the G-Wagon in order to take benefit from section 179. The section does not cover leased vehicles.
· Bought from an unrelated organization or person: Businesses need to ensure that the purchase is made through a person/organization that is not related to them by any means.
· Used in the same year it is purchased: If businesses buy the vehicle at the end of 2022 but use it in 2023, they will have to wait for the 2023 tax return to reap the fruit. Therefore, it is essential to use the vehicle for professional purposes the same year it is bought.
If a G Wagon qualifies for the tax incentive, how much will it affect the cost of the Wagon?
If you own a business in the USA, you might be wondering how much Section 179 tax incentives could impact the cost of your G Wagon. The amount of savings ultimately depends on a few factors. These include whether or not your business is making less than or equal to $2.5 million and whether the G Wagon is being used over 50% for business use.
In general, the tax incentive provided by Section 179 can save up to 100% of the purchase price of vehicles that are used for business purposes. This means that for vehicles that meet all of the requirements, businesses can write off up to $1 million of their depreciable asset purchases.
For instance, if a G Wagon qualifies and is purchased for $100,000, you can write off the total purchase price instead of deducting it over multiple years. This can result in significant savings and make G Wagons more affordable for small businesses.
Applying for the tax incentive: Tips
It is better to keep the following things in mind while applying for the tax benefit under section 179:
· Plan ahead: You can only take benefit of tax deduction in the same year of your G Wagon’s purchase. So plan ahead and keep all the required documentation complete. It can include invoices, receipts, or anything related to the vehicle’s purchase.
· Keep all the requirements in mind: We have covered this point by listing all the requirements in the article.
· Keep good records: You will need to back up your claim with documentation. Keep track of G Wagon, its use, and all associated expenses. Keep a detailed record of all the trips made in a professional capacity, the mileage, and the purpose of all the trips.
· Purchase in bulk: It would help you get a huge tax credit at once.
Section 179 is a tax incentive scheme introduced by the US government to motivate the business sector into buying goods from other industries. However, there are specific criteria that must be fulfilled. Your G Wagon can qualify for the incentive if it belongs to a business, is used predominantly for official purposes, weighs more than 6000 pounds (which it does), and is bought and not leased. Also, it is essential to use the vehicle in the same year of its purchase. We hope you got all your questions answered!