2020 Year End Tax Incentives


Your Small Business May Qualify for a 2020 Tax Deduction of up to $1,000,000

For over 40 years, Quirk Auto Dealers has helped small business owners get the job done. Now under new tax depreciation laws, we’re here to assist you further along in your journey. New terms state that small businesses may be eligible to immediately deduct up to 100% of the purchase price of an unlimited number of qualifying Ford vehicles purchased in 2020 for business use. Not sure which vehicles qualify? Our commercial sales team can help you with that! But for now, let’s go over the new changes to Section 179.

Section 179 Deductions at a Glance

Some believe Section 179 Deductions is complicated. However, this is a common misconception. As you will read, this tax code is simple and easy to understand.

In short, this IRS tax code allows businesses to deduct qualifying equipment and/or software purchased or financed during a given tax year. In terms of commercial and fleet vehicles, small business owners can deduct the full purchase price from their gross income. The reasoning and motivation behind this is to encourage growth through investments. In recent years, people have found loopholes and abused Section 179 Deductions. This was later dubbed the “SUV Tax Loophole”. Because of this, our government has placed limits and restrictions on qualifying vehicles. Be sure to check the list above to confirm the eligibility of your desired commercial vehicle.

How Does It Work?

In years past, when your business bought qualifying equipment, it typically wrote it off a little at a time through depreciation. In other words, if your company spends $50,000 on a machine, it gets to write off (say) $10,000 a year for five years (these numbers are only meant to give you an example).

Now, while it’s true that this is better than no write-off at all, most business owners would really prefer to write off the entire equipment purchase price for the year they buy it. And that’s exactly what Section 179 does – it allows your business to write off the entire purchase price of qualifying equipment for the current tax year. This has made a big difference for many companies (and the economy in general.) Businesses have used Section 179 to purchase needed equipment right now, instead of waiting. For most small businesses, the entire cost of qualifying equipment can be written-off on the 2020 tax return (up to $1,000,000).

Limits of Section 179

Section 179 does come with limits – there are caps to the total amount written off ($1,000,000 for 2020), and limits to the total amount of the equipment purchased ($2,500,000 in 2020). The deduction begins to phase out on a dollar-for-dollar basis after $2,500,000 is spent by a given business (thus, the entire deduction goes away once $3,500,000 in purchases is reached), so this makes it a true small and medium-sized business deduction.

So What’s The Catch?

The qualifying vehicle must be purchased and placed into service by midnight December 31, 2020. It must be used at least 50% for business, based on mileage, in the first year it is placed in service. So if you choose to use it for both personal and business use, the cost eligible for deduction would be the percentage used for business. Please note that the maximum IRS Section 179 Deduction of $1,000,000 allowable is reduced if the Company purchases and/or finances more than $2,500,000 in business equipment during tax year 2020.

Commercial Specials

The information supplied here is provided as a public service. For a complete understanding of Section 179 Deductions, please consult your tax professional. It should not be construed as tax advice or as a promise of potential savings or reduced tax liability. Individual tax situations may vary. Federal rules and tax guidelines are subject to change. For more information about the Section 179 expense write-off or other business vehicle expense write-offs, you should consult your tax advisor for complete rules applicable to your transaction and visit the Internal Revenue website at www.irs.gov.
This analysis applies only to vehicles placed in service in the United States after December 31, 2018, and by December 31, 2020, with no written binding contract for acquisition in effect before January 1, 2020. The aggregate deduction of $1,000,000 available under Internal Revenue Code Section 179 is most beneficial to small businesses that place in service less than $2,500,000 of “Section 179 property” during the year (vehicles and other business property). The full cost of the vehicle may only be deducted on trucks with a GVWR greater than 6,000 lbs. and a bed length of at least six feet. The deduction available in the year of purchase on vehicles under 6,000 lbs. GVWR is set by The Tax Cuts and Jobs Act. IRC Section 280F(d)(7)(B) requires that the limitation under IRC Section 280F(a)(1) be adjusted annually, based on the CPI automobile component for October of the preceding year. The IRS officially announced the Section 280F depreciation limits in Revenue Procedure 2017-29. The limitation for first-year depreciation on passenger automobiles under 6,000 lbs. GVWR is $18,000 and the limitation for first-year depreciation for trucks/vans under 6,000 lbs. GVWR is $18,000. The remaining cost of the automobile, truck or van is depreciated under regular MACRS methods. SUV’s over 6,000 lbs. GVWR and trucks with a bed length of fewer than six feet over 6,000 lbs. GVWR is limited to a deduction of $25,000 in the year of purchase under Section 179(b)(5) with the remaining basis in the vehicle depreciated under normal MACRS methods. The expensing restrictions under Section 280F do not apply to vehicles that are considered to be “qualified non-personal use vehicles” (QNUV’s). A QNUV is generally a vehicle that, by virtue of its nature or design, is not likely to be used more than a de minimis amount for personal purposes. For more information, see income tax Reg. Sec. 1.280F-6(c)(3)(iii), Income tax Reg. Sec. 1.274-5T(k), and Revenue Ruling 86-97, and contact your tax advisor for details. Consult your tax advisor as to the proper tax treatment of all business-vehicle purchases. Not all buyers will qualify for all offers. Available at participating dealers only. For all offers, take new retail delivery from dealer stock by 12/31/2020. See dealer qualifications and complete details.