We had a reader ask the following questions about purchasing a new pick-up in 2013:
"The new 2014 Silverado pickup has a model with a 5' 8" (inside dimension) box. Can you take section 179 on the full amount of this pickup for the 2013 tax year?"
The Tax Code has a provision that does not allow a full Section 179 deduction for the purchase of a farm pickup if the pickup bed is less than six feet. In this case, since the 2014 Silverado pickup's bed is 5'8" long it would fall into this restriction and the taxpayer would only be allowed to take Section 179 on $25,000 of cost times the business percentage. However, since it is a new pickup, the remaining cost basis would be allowed for 50% bonus depreciation and then regular depreciation on the remaining cost basis.
Let's assume the cost of the Silverado pickup is $45,000. Assuming 100% business use, the taxpayer would be able to take Section 179 of $25,000, then 50% bonus depreciation of $10,000 and regular depreciation of $1,500 for a total deduction of $36,500. The remaining $8,500 of cost would be depreciated over the next five years.
Now, let's assume that he purchased a 2014 Silverado pickup with a box exceeding 6' in length. In this case, the farmer could take Section 179 on the full $45,000 cost.
If the pickup is used, then 50% bonus depreciation does not apply. In this case, if the bed is less than 6', the farmer can only take Section 179 of $25,000 plus regular depreciation of $3,000 for a total deduction of $28,000. If the bed is longer than 6', then the farmer may still take full Section 179 deduction of $45,000.
Unlike most farm equipment purchases, the purchase of a pickup in 2013 can result in additional tax complexities. If you are planning on purchasing a pickup this year and the box bed will be less than 6', you may want to discuss this with your tax advisor before making the purchase.