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NOT ELIGIBLE: Section 179 Tax Deduction

53K views 53 replies 16 participants last post by  Robert.Mauro 
#1 · (Edited)
Hey all, just an FYI for those of you who do your own taxes. No matter what the internet says, the Ascent is absolutely not eligible for the Section 179 IRS deduction. There's even a lot of accountants, and the others are definitely wrong. The weight range for the deduction is definitely 6,001 to 14,000 pounds, inclusive.

You will note that coincides with US Department of Transportation's Federal Highway Administration's Class 2 (6,001-10,000 inclusive) and Class 3 (10,001 to 14,000 inclusive) vehicle designations.

The Ascent is most definitely a Class 1 vehicle, in all configurations, regardless of any options or accessories. It always has an exact GVWR of 6,000 pounds, even if you add a thousand pounds of options and accessories. There is no way of adding that one pound of GVWR without doing a vehicle modification requiring a vehicle class change and then getting that certified by whatever agency your state requires and getting that certification filed with your state's motor vehicle department. That's not happening.

This is directly from the IRS, publication 946, page 20 (link below):
Sport Utility and Certain Other Vehicles
You cannot elect to expense more than $25,000 of the cost of any heavy sport utility vehicle (SUV) and certain other vehicles placed in service during the tax year. 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.

Sorry to be the bearer of bad news. :crying:
 
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#2 ·
Sadly that 1 pound of rating will most likely translate to 2 ascent sales lost in MN over the next 1-2 years from me alone. Being able to take a $25K deduction up front and depreciate out the balance vs. depreciating out the entire purchase will make me consider a slightly different vehicle. The deduction does make the vehicle more "affordable" when all things are taken into consideration. I am surprised that Subaru did not give this consideration and get that extra pound of rating.

On the other side of things, our Chev 2500HD is rated at 10000 GVWR. I strongly believe GM did this, because if it is 10001, it is required to fall under DOT regulations at all time they are being used for business use. This means: Daily Logs, driver having a DOT health card, mounted fire extinguisher, flares on board, business name and DOT number on the vehicle.... With it being at 10000 we only have to be DOT compliant if we have a trailer hooked up to the truck.

Maybe Subaru will realize this potential issue and find a way to make an adjustment. Is there any other requirements for the manufacturer by creating a Class 2 vehicle over a Class 1?
 
#4 ·
If I had to GUESS, I'd guess they will not, and that's because, in a variety of states (such as NY), it's a pain to get a Class 2 vehicle insured or registered as a passenger vehicle with passenger rates, and the process for getting the vehicle certified in each state (by the manufacturer) as passenger vehicle eligible varies... whereas 6,000 pounds or less is automatically within the federal weight ranges that most states use for such determinations.

My brother has a Dodge RAM 2500 King Cab with the full big back seat and four doors. NYS insists it needs to be registered as a commercial vehicle unless he jumps through a ton of hoops, including installing a camper cap and a seat back on the bed.

In the NY Metro area, that means there's a LOT of highways one cannot legally drive the vehicle on (all of our parkways). Some people get away with it for a bit, but that's decreasing with the more prolific use of license plate scanners. My brother has been pulled over for it.
 
#6 ·
Robert,
When googling "what is the gvwr of the 2019 Subaru Ascent" is clearly shows 6001. I took delivery of mine last month and was so impressed my brother in California just put a deposit on 1 and plans on taking the tax deduction as he'll use it in business. Your statement confuses me.
Ed
 
#9 ·
Now this makes me wonder if the 6,000 GVWR is not suspension related, but was rather done that way to keep it out of the Class 2 status?

People who are towing may not be as bad off if it is say really rated for 7,000lb but Subaru wanted to keep it as a Class 2 so rated it as 6,000lb?
 
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#16 ·
Keep in mind that you can still use and deduct any business vehicle. It has to be GVWR of 6001+ to qualify for the $25K up front deduction.

For vehicles that qualify $25K is deducted that year and the balance is scheduled over a period of time. Anything under 6001 can still be deducted but the entire deductible value is scheduled over time.

At least this is based on what our CPA has informed me of.
 
#12 · (Edited)
Alas, they are incorrect... the Ascent is ALWAYS 6,000 pound GVWR



Someone is misinformed. Absolutely every production and press and demo Subaru Ascent ever built for sale and/or use in the United States, regardless of trim level, accessories or options, is always and exactly 6,000 pounds GVWR.

This is the Touring. More specifically, this is MY Touring, which has almost every available option and accessories, factory installed.

This may also be confirmed with Subaru of America, which we have already done. This can also be confirmed by going to any Subaru dealership in the United States and opening every drivers door on every trim level Ascent on the lot. They will ALL have the same GVWR of 6,000 pounds. Just like mine:



I think some of the confusion was because some *Canadian* publications and some publications using Subaru Canada's releases miscalculated the GVWR in pounds. When they did the conversion to pounds from kilograms, they rounded up.

In other cases, it was wishful thinking, specifically for the tax deduction that does NOT apply to the Ascent.
 

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#13 ·
Not doubting what you are saying. If you go and Google Subaru Ascent GVWR like I did before I bought mine all you see is 6001 lbs. right or wrong (wrong in this case). My question is what was the source of the 6001 lbs? It almost feels like intentional to get folks to look at the Ascent instead of say the Toyota 4runner.
 
#14 · (Edited)
Simple answer: They did the math in the wrong direction...



I am pretty sure it's Canada that's the problem. :tango_face_wink:

Not really Canada the country, but that a lot of the info the early articles were based on was combinations of US and Canadian market info. The Ascent GVWR in Canada is 2,722kg. That translates into 6,000.983 pounds. Or, the 6,001 pounds some early articles claimed.

They did the math (conversion) in the wrong direction, lol.


The Ascent is a US built car. Its GVWR is 6,000 pounds on the dot. BUT, when you then convert THAT figure to kilograms for Canadian sale, you get 2,721.554 pounds. JUST enough that it rounds up to 2,722 pounds for the Canadian door tags.

The number was never meant to be converted from KG to pounds. It started in pounds and was converted to kg for Canada. So, in losing those ever important decimal places, re-converting from kg to pounds doesn't work.

You can see this on some of the sites that list both figures. I guarantee you, like how Wikipedia can do, they have a built in conversion script. You enter a weight, and a unit of measure (eg: "2,722" and "kg") and the site code does the rest. That doesn't work in this case. Had they instead entered "6,000" and "pounds", it would work, since KG would be converted and rounded to "2,722".

And sorry I misunderstood your initial post. Hope this sufficiently answers it.
 
#17 · (Edited)
Because the Canada numbers came out first.



Because it wasn't. Canada released some of the specs before the US did. These numbers were pre-production numbers that started hitting the two markets in November onwards. In this case, the Canada numbers showed up first. So, Subaru Canada converted to KG from the unpublished Subaru Indiana Automotive number (6,000 pounds) that no one else had seen. Then, the news outlets ran with that number (the Canadian one) and converted that number back to pounds, not realizing that the kg number was rounded up.

I knew the numbers because I'd already seen the car, and took pics of the door tags on a Touring and Limited and spoke to some of the product managers way back in April 2018, but, alas, as far as news articles are concerned, I am not an official number source. :tango_face_wink:

While the door tags are not in this gallery (because they were boring and no one asked), I also took measurements of the interior:
https://www.facebook.com/pg/SubaruAmbassadorRobert/photos/?tab=album&album_id=1972371322803883

But, short version is, Subaru Canada converted the US GVWR to kg, released that info, and news outlets mis-converted it back to pounds. And THEN Subaru of America released the detailed specs.
 
#20 ·
I know...



Believe me, I know. It's exactly what prompted me to make this post and pin it, to hopefully fix the confusion caused by poor reporting. The media dropped the ball on this one, and they don't always go back and fix old articles.

It's not like a number of us didn't know the real numbers, or like they couldn't have asked SoA for the numbers. They just didn't. :sad:

If it were 5,000 pounds vs 5,001 pounds... then, whatever. But this was an important weight barrier that literally changes the class of the vehicle, as well as the tax liabilities.
 
#27 ·
@rychastings said:
they couldnt bump it up a lb even for the 2021 model year?
I don't see why they'd do that. It wouldn't be a passenger car in numerous states, without a bunch of certification work. And it absolutely wouldn't be a Class I vehicle. A Class I vehicle is 6,000 pounds or less. Also, that tiny one pound changes numerous regulatory requirements.

It's not a light truck, and I'd bet good money that it won't ever be bumped into the same category.
 
#29 ·
Yep, every trim, all years, 6,000 pounds on the dot.
 
#30 ·
Let's be very clear about why this is so: SUVs over 6000 lbs GVWR in the US are designated as Class IIa vehicles and you can get fined for driving on certain roads in a Class II vehicle, namely highways.

SUVs are in a grey area because there are cars and there are trucks. SUVs don't really exist because it goes back to their build process and most used to be on truck beds then things changed and the US tax law has not kept up.

Nevertheless, for Tax year 2020 if you buy a 2020 or 2021 Subaru Ascent it is 6k GVWR on the dot and you don't get section 179 deduction, but you do get bonus depreciation which is more valuable to your business because unlike Section 179 deductions, a depreciation deduction can let you have a net operating loss (NOL).

I don't have my charts with me right now, but I believe first year depreciation on a business vehicle under bonus is $18,100. Not bad.
 
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#31 ·
Let's be very clear about why this is so: SUVs over 6000 lbs GVWR in the US are designated as Class IIa vehicles and you can get fined for driving on certain roads in a Class II vehicle, namely highways.
Plenty of SUVs in the US have higher GVWR...and many of them are unibody just like the Ascent. Grand Cherokee, for example, has a 6500 GVWR. Subaru chose to limit the Ascent to 6000 GVWR, but I doubt it's for the reason you cite.
 
#33 ·
Also if you're doing the math and not getting GVWR:

1) Exactly 6000 lbs = 2721.554 kg which would be 2722 kg but it shows 2721
2) 2721 kg = 5998.778 lbs which would be 5999 lbs, but it shows 6000

So we most likely have between 2721.33 kg and 2721.49 kg which would all round up to 6000 lbs and round down to 2721 kg.
 
#35 ·
My brother has gotten fined for his Dodge RAM 2500 King Cab (full bench second row) on the Southern State Parkway, a few times. He no longer drives it on the parkways. DMV insisted it had to be registered as a commercial vehicle (note the plates with the numbers plus 2 letter designation, instead of the passenger car 3 letter plus 4 number designation).

5969
 
#37 · (Edited by Moderator)
@Jim_in_PA

This is (to my knowledge) a NY State specific issue. NY considers pretty much all pickup trucks "commercial vehicles" and as such, bans them from those roadways. GVWR isn't really a consideration. So you can get a ticket for driving your 1996 Ford Ranger on the West Side Highway, but it's totally fine to drive your Navigator or Yukon XL on the same road, despite the GVWR being almost double.
 
#38 ·
That's kinda weird/sad given the very high percentage of half ton pick-em-up-trucks that are purchased as daily drivers/mall-crawlers by the general public. I can see that designation for 3/4 ton and up given they are more likely to be being used as commercial vehicles. But then again, logic doesn't always prevail and fortunately, restricted highways are not common in most geographies.
 
#40 ·
Other than grass, there still isn't. Or on chunks of the Taconic's north-of-I287 stretch.
 
#41 · (Edited by Moderator)
There was an old 1980s David Letterman skit where a child genius was asked questions by Letterman and once the genius replied a funny response was given.

If I remember right after a series of tough (but easy for the kid) questions, David fired off "What is the maximum speed I can do on the Merritt Parkway at night?" The kid replied something like 55 and got "Wrong! I can do 125 easy and not get pulled over!"
 
#43 ·
Let's separate the issues here:

GVWR is Gross Vehicle Weight Rating - it is the manufacturer's rating for how much this vehicle can hold including all passengers, full tank of gas, trunk if full, roof is holding up it's max weight - in other words what is the max safe weight of this vehicle.

Section 179 is advanced expense of depreciation (depreciation is normally a deduction) which lets business owner's expense typically 100% of real property in year 1 rather than over a depreciation schedule of the asset's useful life (cars are 5 years).

The US Government produces tax law from congress which is interpreted by the IRS to set tax preparation rules. I've posted before that SUVs are in a bit of a grey area because the IRS set guidance for cars and trucks, and only lately is filling in the SUV rules. They are for Section 179, that the vehicle has to have > 6000 GVWR and for SUVs be relegate passenger or cargo for hire (think Uber/Lyft, etc). There are some esoteric rules that really don't count for SUVs such as seats 9 passengers or more, separates passenger area from driving area, and others that are more for the van market than SUVs.

Additionally muddying this is the non-IRS side of the government that handles vehicles and transportation which states that vehicles > 6000 GVWR are class IIa (IIb being big trucks) and cannot drive on highways. That said, yes you can likely drive a Chevy Tahoe on a highway and never be ticketed but come end of month and hungry police, you might.

So now in short, the 6,000 lb GVWR for the Ascent is a safety limit, not necessarily bureaucratic, but IMHO Subaru could have easily made it 6,001 lbs and you'd see more Ascent sales (to businesses).
 
#46 ·
So now in short, the 6,000 lb GVWR for the Ascent is a safety limit, not necessarily bureaucratic, but IMHO Subaru could have easily made it 6,001 lbs and you'd see more Ascent sales (to businesses).
It's a very real state limit in multiple states. NY is just one example of places where I've been on parkways with vehicle limitations. Heck, NY State alone is a massive market that'd be affected. Just the NY City parkways carry a million cars a day - and none over 6,000 pounds without special class certifications.
 
#45 ·
Nah...I'm not buying it. 6000 lb is too tidy a round (imperial) number. Except for trailer GVW and trailer tongue load, no other limitations are. Cargo, 1158 lb. Front axle, 3021. Rear axle, 3296. Rim rating... tire rating...etc. Of course it's there on the placard, so we're stuck with it, regardless of its origin or intent.
 
#47 ·
Robert,

Thanks on the enforcement side. Yes, it's up to each state, so YMMV if you're in California, Arizona, Vermont, New York etc, and check posted signs for state routes and Federal highways.

As for the tax side of things Sec 179(a) disallows expense of any amount of business vehicles placed in service in 2020 that are GVWR 6000 lbs or less.

While it's a shame Subaru didn't peg GVWR to 6001 lbs, Sec 179 is a nonrefundable expense. You cannot take a loss with Sec 179. E.g. if your business income is $40k, you can get a max of $40k of Sec 179 and defer the residual.

Also, if your business use dips to 50% or lower, you are subject to Sec 179 depreciation recapture!

But what they can do for their Ascent and similar <= 6000 lb business vehicles:

For passenger automobiles to which the Sec. 168(k) additional (bonus) first-year depreciation deduction applies and that are acquired after Sept. 27, 2017, and placed in service during calendar year 2020, the depreciation limit under Sec. 280F(d)(7) is $18,100 for the first tax year; $16,100 for the second tax year; $9,700 for the third tax year; and $5,760 for each succeeding year, all unchanged from 2019.

Thus for any vehicle new or used business vehicle bought by a business as "new to them" e.g., Ascent Touring '20 or '21 bought in 2020 and placed in service in 2020 (or any used vehicle placed in service in 2020):
2020 depreciation limit: $18,100
2021 depreciation limit: $16,100
2022 depreciation limit: $9,700 (you're at 43.9k now)
2023 depreciation limit: $5,760 (you're at 49.6k now)
2024 depreciation limit: $5,760 (in case you exceeded $50k purchase)

Each year you take depreciation without respect to net income, because unlike Sec 179 expense, Depreciation deduction can allow an NOL (net operating loss).

In terms of disposition of the vehicle (sales, liquidating to a partner, etc), there are tax consequences (e.g., recapture of Sec 1245 depreciation, partner's outside basis, etc) that I can chat about privately if one so desires.
 
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