If your business includes a warehouse or other job site that uses equipment such as trucks or forklifts, you should know about Section 179 forklift tax deductions. This section of the tax code permits you to deduct 100% of the purchase price of business equipment from your company’s annual income.
How Do Section 179 Forklift Tax Deductions Work?
Prior to this tax incentive, when you purchased new or used equipment for your business, the IRS allowed you to depreciate the value of the item and spread out the tax breaks over the equipment’s economic lifespan.
For example, if you bought a vehicle for $40,000 and expected it to be in service for five years, you could deduct $8,000 per year from your taxable income for each of those five years. If you bought that same truck using the forklift Section 179 deductions, you could write off the entire $40,000 in the same year that you purchased the vehicle.
There are a few stipulations, but they’re pretty straightforward.
Business Use
First, the forklift or other equipment must be at least 50% for business use to qualify for Section 179 forklift tax deductions. You cannot just write off the cost of a new personal vehicle, in other words. However, as long as the equipment is for business use, there are few other restrictions.
If you use the forklift for business less than 100% of the time, you can only deduct the business portion. For instance, if you buy a $40,000 vehicle and use it for business 80% of the time and for personal projects or side work the rest of the time, you can only write off 80% of the cost, or $32,000, from your taxable business income.
Cost and Deduction Limits
The maximum equipment deduction is $1,080,000, with a bonus of $100,000, allowing you to purchase and write off a total of $1,180,000 in equipment in a single year. What does this mean for your bottom line?
The exact amount you would save using forklift Section 179 deductions depends on how much you spend and your tax rate. Assuming a 35% tax bracket, if you purchased a vehicle for the maximum amount you can deduct, the tax deduction would save you $413,000 in taxes. Your investment cost of $1,180,000 would fall to $767,000.
If you spend over $2,700,000 on equipment in a single year, these tax breaks are reduced, and if you spend over $3,780,000, you do not qualify for these incentives. The idea behind forklift Section 179 deductions is to make it more affordable for small and medium-sized businesses to purchase the equipment they need to grow and thrive, not to subsidize large companies.
Read more about these incentives or ask your accountant or financial advisor for more information on how to take advantage of them.
Do All Vehicles Qualify for Section 179 Forklift Tax Deductions?
All business equipment, new or used, qualifies for Section 179 forklift tax deductions. If you need lift trucks or other vehicles for your business, there is no better time to buy them. Compare the pricing and availability of the vehicles you need from a range of dealers in your area.
Compare New & Used Forklifts For Sale
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