Small business owners—especially in the age of COVID-19—need to save as much money as possible. The IRS recognizes this reality and offers various tax benefits to help businesses grow and save money. If you purchased or leased a vehicle for your small business this year, you may be eligible for a Section 179 tax credit. This part of the tax code allows owners to deduct all or part of the acquisition cost of an eligible vehicle in the year the vehicle is put into service. So, we’re going to use this article to outline the best Tesla Model X Section 179 vehicles for 2021.
What is section 179?
Generally, when you purchase major equipment (such as a vehicle) for your business, you cannot spend 100% of the cost in the first year. Instead, you capitalize a portion of your purchases and expenses over several years in a process called depreciation. Thus, with the removal of Section 179, you may choose to restore all or part of the cost of Section 179-appropriate building vehicle to the limit by removing it in the year you put the building into operation. First-year deductions can save you a lot of money when it comes to paying taxes. Thus, as the IRS points out clearly, there are limitations and you cannot withdraw all the money when you buy a car for your business. To avoid abuse, the IRS says the Section 179 fee deduction for SUVs put into service for tax years beginning in 2021 is up to $26,200. The cap helps avoid “Hummer write-offs,” where businesses use Section 179 to cover the cost of an overly expensive SUV.
To encourage big purchases, the IRS also offers businesses a special depreciation allowance — or bonus depreciation. This can be combined with Section 179, which allows businesses to deduct up to 100% of qualifying purchases in the first year. However, once again the restrictions apply to many vehicles. Notably, for vehicles purchased after September 27, 2017 and placed in service in 2020, the limit for first-year depreciation, special depreciation allowances, and Section 179 deductions remains at $18,100. (Note: this figure increases to $18,200 in 2021). In addition to the above-mentioned SUV exemption for the $18,200 limit, the IRS completely waives the maximum deduction for the following Section 179 for Tesla Model X vehicles:
- Designed to accommodate more than 9 passengers behind the driver’s seat;
- Equipped with a cargo area (open or closed by a lid) that is at least 6 feet in interior length and not easily accessible from the passenger compartment; or
- It has a complete enclosure that completely encloses the cab and load-carrying unit, has no seat behind the driver’s seat, and has no body part protruding more than 30 inches beyond the leading edge of the windshield
- If your vehicle falls into one of these three categories, it is eligible for the full Section 179 deduction ($1,050,000 in 2021).
Which vehicles are compliant with Article 179?
The IRS roughly divides Section 179 vehicles into three categories: sedans and luxury vehicles, SUVs, and “other” vehicles:
- Auto ($18,200 deduction limit): For depreciation purposes, a car is any four-wheeled vehicle (including trucks or vans) used primarily on public streets, roads, and highways. Its gross unladed weight must not exceed 6,000 lbs.
- SUV (with a deduction limit of $26,200): Any four-wheeled vehicle primarily designed or used to transport passengers on a public street, road, or highway […] and with a gross vehicle weight exceeding 6,000 pounds and a gross vehicle weight not exceeding 14,000 lb. weight.
- “Other” vehicles (the standard limit of $1,050,000 for Section 179): These vehicles include the three exceptions listed in the section above (i.e. certain large passenger cars, pickup trucks, and vans).
GVWR and Curb Weight
When the IRS refers to vehicle weight, it uses the Gross Vehicle Weight Rating or GVWR. This is equal to the maximum safe weight of your vehicle. Conversely, the kerb weight is equal to the unladed or unladed weight of the vehicle. For example, assume the kerb weight of the vehicle is 4,000 pounds. If safety regulators determine that the vehicle can safely carry an additional 2,000 pounds of fuel, passengers, accessories and cargo, it will have a GVWR of 6,000 pounds. You can find this information on your vehicle’s driver’s side door panel, which defines many of the Section 179 classifications.
Best Luxury Cars of Section 179
Section 179 GVWR must be 6,000 pounds or less for luxury cars and between 6,000 and 14,000 pounds for luxury SUVs. As mentioned, the first-year Section 179, bonus depreciation and periodic depreciation limits of up to $18,200 apply to cars, while the $26,200 limit applies to SUVs.
2021 Mercedes G-Class
This high-end luxury SUV is powered by a 416-horsepower V8. It has an MSRP of $154,520 and a GVWR of £6,945, compliant with SUV Section 179 deductions for business owners of $26,200.
2021 Tesla Model X
This luxury crossover SUV features an electric engine with 1,020 peak horsepower. Its MSRP starts at $79,990 with a GVWR of 6,800 pounds. Eligible business owners can deduct $26,200 under Part 179 of the SUV section.
2021 Land Rover Range Rover P525
This high-end luxury SUV is powered by a 518-horsepower V8. It has an MSRP of $105,950 and a GVWR of £6,967, and eligible business owners can deduct $26,200 under Section 179