IRS Section 168(k) is a tax code that allows many small businesses to write-off up to $500,000 on their IRS tax returns when investing in new equipment. Previously, companies might have dispersed these deductions out over several years. IRS Section 168(k) changes this and now allows many small businesses to write-off up to the entire purchase cost of qualifying new Ford trucks or vans. Continue reading if you would like to deduct up to $500,000 in new automobiles in the first year they're placed in service.
Tax Benefit Examples For Qualifying Businesses
| Tax Treatment | Up to 100% of the purchase cost in the first year (plus any remaining basis using MACRS method) | Up to $25,000 of the purchase cost in the first year (plus any remaining basis using MACRS method) | Up to $11,560 in the first year (plus any remaining basis using MACRS method) | Up to $11,160 in the first year (plus any remaining basis using MACRS method) |
| Applies To | Trucks and Cargo Vans over 6,000 lbs. GVWR | Passenger Trucks/Vans and SUVs over 6,000 lbs. GVWR | Trucks and Cargo Vans under 6,000 lbs. GVWR | Passenger Automobiles under 6,000 lbs. GVW |
| Eligible New Ford Vehicles | F-150 (6.5-ft. or 8-ft.bed), F-250/F-350 Super Duty®, Transit Van | Expedition, F-150 SuperCrew® (5.5-ft. or 6.5-ft. bed), Transit Wagon | Transit Connect Van, Transit Connect Wagon | Edge, Flex, Escape, Focus, Explorer, Fusion, Fiesta and Taurus |
What Is IRS Section 168(k)?
Section 168(k) is the current IRS tax code that allows you to buy qualifying Ford vehicles and deduct up to the full purchase price (including any amount financed) from your gross taxable income if purchased before December 31, 2019. If you purchase a qualifying vehicle, you may be able to write-off the full purchase price from your gross taxable income.
Which Vehicles Qualify For The Greatest IRS Savings?
The vehicles which qualify for the greatest tax savings are trucks with a GVWR greater than 6,000 pounds and a bed length of at least six feet (i.e., Ford F-150/F-250/F-350). These new Ford vehicles qualify for the maximum first-year depreciation deduction of up to the full purchase price. SUVs, including trucks, with a bed length of fewer than six feet and a GVWR greater than 6,000 lbs. (i.e., Ford F-150 SuperCrew 5½ ft. bed, Explorer, Expedition) qualify for a maximum first-year depreciation deduction of up to the first $25,000 of the full purchase price plus 60% depreciation of any remaining balance.
How Do I Receive This?
The qualifying vehicle must be purchased and placed into service between January 1, 2020, and December 31, 2020, for it to qualify for the Section 168(k) deduction. The vehicle must be used at least 50% for business, based on mileage, in the first year it is placed in service. If your truck is used for both personal and business use, the cost eligible for the deduction would be the percentage used for business. Based on this tax code, all businesses that purchase or finance less than $2 million in business equipment during the 2020 tax year should qualify for the Section 168(k) deduction.
NOTE: The information supplied here is provided by your local Ford Dealer as a public service to its customers. It should not be construed as tax advice or as a promise of potential tax savings or reduced tax liability. Individual tax situations may vary. Federal rules and tax guidelines are subject to change. For more information about the Section 168(k) expense write-off or other business vehicle expense write-offs, you should consult your tax advisor for complete rules applicable to your transaction and visit the Internal Revenue Website at www.irs.gov