Your section 179 deduction is generally the cost of the qualifying property. However, the total amount you can elect to deduct for the current year under section 179 is subject to a dollar limit and a business income limit. There may also be further limitations for certain vehicles (also called the "luxury" limits). However, as noted below, there is an exception for a vehicle used directly in the trade or business of transporting persons or property for pay or hire (such as a taxi or town car).

In order to remove the depreciation limitations mentioned below and take the full section 179 deduction for your vehicle for hire (such as a taxi or town car), change the asset type from "Car" to "Heavy Truck." The asset type is not information sent to the IRS with the return, but is only used for section 179 limitation calculations.

If the vehicle relates to Schedule C (Form 1040) Profit or Loss From Business, go to our Schedule C - Entering Depreciation in Program FAQ to enter or review your vehicle expense information in the TaxAct^® program.

Note. If you notice your section 179 deduction is not the full amount entered, it may be limited by your business-use percentage (based on the mileage entered for the vehicle).

You can elect to recover all or part of the cost of certain qualifying property, up to a limit, by deducting it in the year you place the property in service. This is the section 179 deduction. You can elect the section 179 deduction instead of recovering the cost by taking depreciation deductions.

Per IRS Publication 946 How to Depreciate Property, page 18:

Dollar Limits

The total amount you can elect to deduct under section 179 for most property placed in service in tax years beginning in 2022 generally cannot be more than $1,080,000. If you acquire and place in service more than one item of qualifying property during the year, you can allocate the section 179 deduction among the items in any way, as long as the total deduction is not more than $1,080,000. You do not have to claim the full $1,080,000.

Situations affecting dollar limit. Under certain circumstances, the general dollar limits on the section 179 deduction may be reduced or increased or there may be additional dollar limits. The general dollar limit is affected by any of the following situations.

• The cost of your section 179 property placed in service exceeds $2,700,000.
• Your business is an enterprise zone business.
• You placed in service a sport utility or certain other vehicles.
• You are married filing a joint or separate return.

Costs Exceeding $2,700,000

If the cost of your qualifying section 179 property placed in service in a year is more than $2,700,000, you must generally reduce the dollar limit (but not below zero) by the amount of cost over $2,700,000. If the cost of your section 179 property placed in service during 2022 is $3,780,000 or more, you cannot take a section 179 deduction.

Sport Utility and Certain Other Vehicles

You cannot elect to expense more than $27,000 of the cost of any heavy sport utility vehicle (SUV) and certain other vehicles placed in service in tax years beginning in 2022. This rule applies to any 4-wheeled vehicle primarily designed or used to carry passengers over public streets, roads, or highways that is rated at more than 6,000 pounds gross vehicle weight and not more than 14,000 pounds gross vehicle weight. However, the $27,000 limit does not apply to any vehicle::

• Designed to seat more than nine passengers behind the driver's seat,
• Equipped with a cargo area (either open or enclosed by a cap) of at least 6 feet in interior length that is not readily accessible from the passenger compartment, or
• That has an integral enclosure fully enclosing the driver compartment and load carrying device, does not have seating rearward of the driver's seat, and has no body section protruding more than 30 inches ahead of the leading edge of the windshield.

Business Income Limit

The total cost you can deduct each year after you apply the dollar limit is limited to the taxable income from the active conduct of any trade or business during the year. Generally, you are considered to actively conduct a trade or business if you meaningfully participate in the management or operations of the trade or business.

Any cost not deductible in 1 year under section 179 because of this limit can be carried to the next year. Special rules apply to a deduction of qualified section 179 real property that is placed in service by you in tax years beginning before 2016 and disallowed because of the business income limit. See Special rules for qualified section 179 real property under Carryover of disallowed deduction, later.

Page 53:

Passenger Automobiles

A passenger automobile is any four-wheeled vehicle made primarily for use on public streets, roads, and highways and rated at 6,000 pounds or less of unloaded gross vehicle weight (6,000 pounds or less of gross vehicle weight for trucks and vans). It includes any part, component, or other item physically attached to the automobile at the time of purchase or usually included in the purchase price of an automobile.

The following vehicles are not considered passenger automobiles for these purposes.

• An ambulance, hearse, or combination ambulance-hearse used directly in a trade or business.
• A vehicle used directly in the trade or business of transporting persons or property for pay or hire.
• A truck or van that is a qualified nonpersonal use vehicle.

CAUTION! Although vehicles used to transport persons or property for pay or hire and vehicles rated at more than the 6,000-pound threshold are not passenger automobiles, they are still “other property used for transportation” and are subject to the special rules for listed property.

Please see Chapter 5 of IRS Publication 946 for these listed property rules, such as the business-use requirements.

Note that any link in the information above is updated each year automatically and will take you to the most recent version of the webpage or document at the time it is accessed.