Anyone who has ever had to file their taxes knows that it’s not always the most fun experience. However, there may be a silver lining this year for taxpayers who own a Ford Explorer or buy one this year.
Thanks to a new tax deduction available this year, you may be able to get some tax savings or even your money back! Read on to learn more about the new deduction and how you can claim it.
In this article we will be discussing Ford Explorer Tax Write Off 2021-2022.
Ford Explorer Tax Write Off:
In order to write off a Vehicle it needs to meet many requirements for you to be able to take it as a Tax Write off. These requirements include but are not limited to
Business Percent Use
IRS requires you to keep track of your miles so you can determine if you are using your business vehicle 70% for business or 90% for your business. You are only allowed to write off the amount that is used for business and not for personal use.
Ordinary and Necessary
In order for the Ford Explorer Tax Write off to be allowed, it needs to be ordinary and necessary in the field of work you are in. For example in construction, you will need pickup to haul materials. That will be considered Ordinary and Necessary.
Furthermore, If you are a realtor or a business consultant, then Ford Explorer may be a tax write off as your Customers Expect you to have a safe vehicle when you are taking them to see properties or taking them to various business destinations.
Gross Vehicle Weight
If the Vehicle is 6000 pounds or more, then you are allowed to write off the full value of the vehicle as long as its 100% business use and placed in the service in the year you are doing the tax write off for.
If any vehicle is less than 6,000 pounds max you can do in 2022, is $18000 first year and remaining over a 5 year period.
Ford Explorer Lease Vs Purchase
Lease Example & Calculation
If you lease a vehicle, you get to write off the actual amounts you paid for example if you lease Ford Explorer ( 36 Month Lease) and Put $18,000 Down Payment(Lease Buy Down) and $1000 Per month for the entire year. Then you write off the lease as following:
Lease Deposit $18000 Divided by Lease Term 36 Months So you will get $6,000
Yearly Lease Payment: 1000 Times 12 Months is $12,000
Total Write off $6,000 Plus $12,000= $18,000
Purchase Example & Calculations:
If you purchase the Ford Explorer for $70,000 and put down $20,000 and finance the remaining over 60 months the calculations will work the following way assuming 100% business use:
Since Ford Explorer qualifies for a vehicle equal to or more than 6000 pounds, you can either deduct the entire $70,000 in the first year(if you have enough profit) or deduct a portion( Example $30,000) of it and spread the remaining($40,000) over 5 years.
You can take the Standard mileage deduction of 56 cents( in 2021) a mile but we do not recommend that as the actual deduction in this case will be significantly more than Standard mileage deduction.
Ford Explorer Tax Write off Weight
2022 Ford Explorer Gross Vehicle Weight is 6160 lbs. Ford Explorer Qualifies for the 6000 Pound or more requirement(Per IRS) and uses a combination of Section 179 and Bonus Depreciation.
Ford Explorer Tax Write off California
California has very specific rules pertaining to depreciation and limits any Section 179 to $25,000 Maximum per year. So for example, if you purchase a vehicle for $125,000,
you can write off $25, 000 as Section 179 in the first year and the remaining amount of $100,000 in this example has to be spread over a 5 year period.
While the IRS allows Bonus Depreciation, California doesn’t allow Bonus depreciation and the entire amount is added back to your State return where it is taxed.
Ford Explorer Section 179 Deduction
Internal Revenue Code, Section 179 Deduction allows you to expense up to 25,000 on Vehicles(One year) that are between 6000 Pounds and 14,000 Pounds or More in the year they are placed in service.
If you are looking to write off the entire purchase price of Ford Explorer, look into Bonus depreciation rules that were passed under TCJA. We have more details below.
To learn more about Section 179 See IRS Section 179 Details here
Ford Explorer Bonus Depreciation
Bonus Depreciation has been significantly improved by the Tax Cuts and Jobs Act.
Under the new TCJA, Bonus Depreciation allows you to deduct a specified percentage of the cost of assets in the year they are placed in service.
This deduction allows you to take your profit to negative as compared to Section 179 which only allows you to break even or make your profit zero.
For SUVs such as Ford Explorer that are 6000 pounds or more, can be deducted 100% in the year purchased and placed in service.
Tip: Under Bonus Depreciation rules, you can even purchase a Used Ford Explorer and use Bonus Depreciation as well.