If you're a business owner, Section 179 of the IRS tax code can offer unique benefits and advantages that can make your new vehicle purchase even more rewarding.                

Section 179 Deduction Explained

**As always, if you have questions, consult your tax professional for exact rules regarding Section 179 and vehicles.**

Fundamentally, Section 179 of the IRS tax code gives businesses the ability to deduct the full purchase price of qualifying equipment and/or software purchased or financed during the tax year. This means that if you buy (or lease) a piece of qualifying equipment, you can deduct the FULL PURCHASE PRICE from your gross income. This incentive was created by the United States government to encourage businesses to buy equipment and invest in themselves.

Vehicles and Section 179

Vehicles are among the most popular uses of the Section 179 Deduction. Years ago, this deduction was commonly referred to as the "Hummer Tax Loophole" since at the time it allowed businesses to purchase large SUVs and write them off in the first year. Due to this particular use (or abuse) of the tax code, this section has been modified with the limits listed below. It's still true that Section 179 can be advantageous when it comes to buying vehicles for your business.

All vehicles used for business purposes qualify for a deduction for depreciation - although most passenger vehicles are limited by a maximum 1st year depreciation deduction of $20,200 while other vehicles that by their nature are not likely to be used more than a minimal amount for business purposes, may not qualify for the full Section 179 Deduction (full policy statement available at IRS.gov). But trucks with a GVW above 6,000 are eligible for the full 100% of the purchase price deduction if they are utilized exclusively for business purposes.

Note: The deduction for business vehicles is the same whether they are purchased outright, leased, or financed.

Limits for SUVs or Crossover Vehicles with GVW above 6,000 pounds

• Certain vehicles like SUV's and Crossovers (with a gross vehicle weight rating above 6,000 lbs. but no more than 14,000 lbs.) may qualify for Section 179 or Section 168(k) "Bonus Depreciation" allowing for a business to deduct up to 100% of the purchase price in the current tax year provided the vehicle is purchased and placed in service prior to January 1, 2024, and it meets other conditions.
  
              

Ford Vehicles that Qualify for Section 179 Deduction

Ford trucks and SUVs have earned a renowned reputation for potent performance, robust durability, and tremendous value when compared to the competition.  The following Ford vehicles qualify for Section 179 deduction.

• Explorer (2WD and 4WD)
• Expedition (2WD and 4WD)
• F-150 (and larger) (2WD and 4WD)

Other Considerations

• Vehicles MUST be titled in the company name (not in the company owner's name).
• The vehicle must also be used for business at least 50% of the time - and these depreciation limits are reduced by the corresponding % of personal use if the vehicle is used for business less than 100% of the time.
• You can only claim Section 179 in the tax year that the vehicle is "placed in service" - meaning when the vehicle is ready and available - even if you're not using the vehicle. Further, a vehicle first used for personal purposes doesn't qualify in a later year if its purpose changes to business.

**As always, if you have questions, consult your tax professional for exact rules regarding Section 179 and vehicles.**

Individual tax situations may vary. The information presented was accurate at time of publishing. Federal rules and tax guidelines are subject to change. Consult your tax advisor for complete details on rules applicable to your business.

*Comparisons based on Section 179 and 168(k) of the Internal Revenue Code, which allows for additional first year depreciation for eligible vehicles and reflects figures for owners who purchase vehicles for 100 percent business use and place vehicles in service by January 1, 2024.

**With Gross Vehicle Weight Ratings (GVWR) of more than 6,000 pounds, these Ford models are classified as “heavy SUVs.” Gross Vehicle Weight Rating (GVWR) is the manufacturer’s rating of the vehicle’s maximum weight when fully loaded with people and cargo.