Today TaxMama® hears from George in the TaxQuips Forum, with this question. “I just bought a new truck to use for business use and I have a few questions:
1. I want to add a few after-market parts – running boards, heated seats, and heated steering wheel. Will I be able to deduct the cost of these items on my taxes? If it matters, I use a 4-wheeler to plow snow at the rental houses. I use the truck to haul the 4-wheeler around. The heated wheel and seats are nice when coming in out of the cold. But I don’t think anyone could argue that they are “needed”. (I’m not that’s sure if that’s required for the deduction or not)
2. I plan to use the truck for 100% business use, however it’s possible that could change and I’m wondering if that would affect the possible deductions with the items above if I use it for some personal use.
3. What happens if I use the truck for 100% business use for the first few years but then in the 7th or 8th, it drops to 90% business use? Is there any kind of recapture (or something similar) that i would have to do?”
Mike Reed, EA in California responds, with wisdom.
Mike explains that to deduct a business expense it must be ordinary and necessary.
Your expenses sound both ordinary and somewhat necessary.
Now, do you expense these items (completely write them off in the first year) or depreciate them over several years? If they are going to last more than a year, you should expense each item over its expected useful life. However in reality if the asset is valued at less than a couple hundred dollars you can expense it all in the initial year without any problems. If you have several hundred dollars in added equipment, avoid any problem and use a five year life.
Depreciation of motor vehicles has several restrictions. You should talk with a tax professional to be sure you start off with the most advantageous method for your situation.
If you use the truck 80% for business and 20% for personal, then you simply allocate the expenses by the usage. Figure this percentage each year – keep a mileage log, and log all expenses.
And remember, you can find answers to all kinds of questions about vehicle costs and other tax and business issues, free. Where? Where else? At www.TaxMama.com.
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