Yep! I paid off my SUV using IRS Section 179. This hidden gem has been around for a very long time and in many ways helped fuel the SUV boom we had many years ago. When I found out about it, I was in the market for a big ‘ole 2004 GMC Yukon Denali XL.
What Is IRS Section 179?
IRS Section 179 is the tax code that allows businesses to deduct the cost of qualified equipment and/or software. This means things like “Off the Shelf” Software (Musicians take note) and “Business Use Vehicles”. Obviously, there are plenty of restrictions they put on it however surprisingly they aren’t that bad. For more detailed information check out the website www.section179.org. They explain it quite well.
This section of the tax code dubbed “The SUV Tax Loop Hole” in 2005 was part of a larger tax cost recovery system. Originally it was for vehicles that had a gross weight of 6,000 lbs. or more and it still is. Back then the only vehicles that had that kind of weight were farm equipment and Bentleys. Additionally, business owners were able to write off the first $100,000 of the purchase in its first year of service.
Obviously, the IRS needed to make changes since people started abusing it, so they threw in some new rules and lowered it to $50,000. Now the SUV Boom! I’m a plumber and I purchase a Sport “Utility Vehicle” and didn’t mind paying $50k. So as you can imagine A LOT of businesses were taking advantage of it and SUVs were freggin’ everywhere!
It didn’t take long (a few years later) before the IRS eventually dropped the cap to $25k. It was around that time where I purchased my SUV. One other cool part is that the vehicle can be used! Sweet! I had no problem finding one used because gas prices were crazy high and people were turning them in left and right. Perfect timing!
How I Pay Off My SUV using IRS Section 179
As a musician, I travel a lot. I Load up gear, pick up band members, go from gig to gig and rack up miles. It only made sense to buy an SUV. I filed my taxes every year and claim all money made as a gigging musician. What made me look for ways to save on taxes was due to a conversation I had with my accountant Karen Cole (www.taxladyandassociates.com). She said “Addam you need more write-offs. Buy more stuff!”. How about a new SUV!? Sounds good to me!
Before I made the purchase she verified that this section is legit and listed everything I needed to do in order to make it happen. Shopping I go!
Here are some of the rules that I had to follow in order to take advantage of this write off:
- Be in Business – I am a Musician who pays taxes on the money I earn. Technically I am considered “Self Employed”.
- Make Money – Here was the largest obstacle for me. In order to write off the first $25k, I had to make $25k or more. I only made $7k that year as a musician, so my write off was $7k. The good part is that I was able to do take this deduction every year for 3 years until I reached the $25k.
- Purchase from Authorize Entity – Can’t just purchase the vehicle from my buddy. It had to be a legit spot…whatever that means.
- The Vehicle Must Be Used MORE THAN 50% for Business – I had another car that I used to get to work so I ended up using the truck for more business than personal.
I don’t think I’m missing anything, but these were the general rules when I did it. My SUV was $30k so had I made $25k as a musician, my out of pocket would have been $5k. Pretty awesome right?
If you are a self-employed professional with or without a day job, you can take advantage of this. As long as you follow the rules which I’m confident has changed some, you will be ok. I am not a tax professional or giving tax advice. Please contact your tax accountant or attorney to make see how you can take advantage of today’s rules to take advantage. This is what I had to go through and successfully used to pay off my SUV.
There are some other cool savings that the IRS can help foot the bill for as well. Check out Saving Money By Switching to Google Fi. This is TOTALLY useful when having a business with multiple numbers and the Data Only sim for the larger devices. I use it for mine and it’s almost the perfect setup.
Hope this helps!