Question

During 2018, your firm acquires a 5,000-lb. SUV for $30,000 and a 6,200-lb. SUV for $35,000. How much of a Section 179 deduction will your firm take on each vehicle in 2018?

a. $25,000 and $25,000

b. $0 and $25,000

c. $30,000 and $35,000

d. You cannot take a Sec. 179 deduction for SUVs.

Answer 1

Section 179 provides maximum deduction for assets purchased for business purpose in the first year of purchase

Section 179 is applicable only in the first year of purchase and if asset is used for both personal and business purpose than the use for business purpose should be more than 50%

In case of SUVs having weight above 6000 lbs are eligible for deduction under section 179 with maximum deduction of $25,000 in 2018.

The amount of deduction is lower of the tax basis of the asset or $25,000

The 5000-lb SUVs is not eligible for section 179 deduction as the weight is below 6,000 and so the deduction amount would be $0.

The 6000-lb SUV which costs $35,000 is eligible for deduction under section 179 for maximum of $25,000 in 2018.

Assuming that the firm is using the vehicle for 100% business purpose.

Therefore, section 179 deduction available to the firm is $0 and $25,000