Don’t Overlook This Tax Benefit
As you’re developing your 2019 business plan, it’s time to start thinking about the glorious Section 168(k) tax benefit.
That’s right — nothing warms the cockles of a contractor’s heart like new truck purchases — except maybe being able to deduct the entire purchase price on a tax return.
A Ram truck is generally qualifies under section 168(k) for U.S. federal income tax purposes. This means a taxpayer may elect to treat the cost of any qualified property as an expense allowed as a deduction for the taxable year in which the property is acquired and placed in service. A qualifying business may expense all of Section 168(k) property during 2019. That’s a lot of trucks.
If your vehicles experienced higher-than-expected wear and tear last year, or if you are anticipating rapid growth this year but can’t decide whether to take the plunge, you owe it to yourself to discuss Section 168(k) with your accountant.
Consider the fictional example of Bob the remodeler. Bob has focused on the high-end residential market for 12 years, but in October one of his best clients asks him if he would be able to take over the maintenance of 15 local apartment complexes that the client and his partners expect to purchase in January. Bob starts crunching the numbers and figures he will need to hire at least two more crews and buy two more vehicles to service the account.
After checking out the Ram Commercial Vehicles Upfit Guide, Bob decides a Ram 3500 Chassis Cab with a crew cab, 60-inch cab-to-axle length and dual rear wheel and a Ram ProMaster City® Tradesman Cargo van upfitted with construction service bodies will meet his needs perfectly. He is a little leery about investing $70,000, but he also senses that his residential work is drying up.
He plugs the numbers into Ram’s Section 168(k)Tax Deduction Calculator, which shows him that if he purchases the vehicles before the end of the year, he can deduct the entire purchase price of both vehicles from his 2019 income tax return. Assuming Bob pays a tax rate of 35 percent, that amounts to a tax benefit of roughly $24,400. Long story short, Section 168(k) will effectively reduce the price of the vehicles by 35 percent.
As you’re planning out your vehicles needs for 2019, be sure to discuss your eligibility for this tax benefit with your accountant. While you’re at it, don’t forget to check out Ram Commercial Vehicles’ incentives and offers.