Today TaxMama hears from Richard in McAllen Texas, who asks: “I am in the process of starting up a moving and packing business. It was my intention to purchase one or two used trucks—the type that the truck rental firms sell off after they have deprecitated them to their fullest.
My question: Will used vehicles qualify as a business equipment expense and can I deduct the total amount that I pay for these vehicles this year?
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Dear Richard,
Buying used equipment can be a really good idea. Do make sure the trucks are completely checked out and you know the condition of brake lines, hoses,
transmissions, etc. Get a good, realistic estimate of the costs to maintain them, since you will not be getting any warranty with them.
And, yes, used trucks will definitely qualify as business equipment.
But, depending on the price, you won’t be able to write them off in one year.
https://www.irs.gov/publications/p946/index.html
Typically, you can write trucks off over 5 years. Do NOT use the restrictive luxury vehicle
depreciation rules. The regular 5-year depreciation rates work in your favor.
In addition, there is a bonus depreciation that you can use, under Section 179.
This lets you take an extra deduction first, before you start depreciating.
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For 2006, the maximum amount is $108,000 ($112,000 in 2007). So, that might just let you write off the entire cost of your trucks, if they’re relatively cheap. However, If you spend more than $430,000 ($450,000 in 2007) on all depreciable property during the year, you’ll have to start reducing your Sec 179 deductions
https://www.taxguru.org/incometax/Rates/Sec179.htm
Kerry M. Kerstetter, CPA’s Explanation of Section 179, with current limits
You can read IRS Publication 946, all about depreciation.
https://www.irs.gov/publications/p946/index.html
And remember, you’ll find answers to lots of business and other tax information, free.
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Where? At TaxMama.com
- Ask TaxMama :: Where taxes are fun and answers are free
- IRS Publication 946 :: Depreciation (only includes 2004 limits)
- Kerry M. Kerstetter, CPA’s site :: Explanation of Section 179, with current limits
- Small Business Taxes Made Easy :: Chapter 6 – Expenses and Depreciation
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