Help or Hurt for tax time?

Question

My husband just started his own buisness the begining of this year...would buying a used dump truck for the buisness, hurt or help come tax time??

Answer 1

If the asset is placed in service in 2007 (that means he starts using it for business in 07, not merely purchases it) it can either be depreciated over its useful life, expensed under Section 179, or a combination of the 2.

To 179 the truck there must first be business profit at least equal to the amount of 179 taken, as a 179 deduction cannot be used to create a loss.

Depreciating the truck over its useful life using MACRS will not provide much tax benefit if the truck is the primary asset purchased during the year. That is because if over 60% of the company's depreciable assets are purchased in the last quarter of the year, the mid-quarter convention must be used.

If that is the case, for 2007 you would be limited to claiming depreciation of only 5%.

Finally, don't make the purchase only for tax purposes. If a new dump truck is either needed or will be needed soon, though, and you can 179 it, it may be to your benefit to get the truck now.

Answer 2

Would help tax wise just as the previous post stated you would depreciate over its life time. Or if it used and has little value and will be on the road frenquently take the milage and gas expense each year. The only thing is the IRS does not let you pick and choose each year what method you want to use. I usually take the milage for my clients 9 out of 10 the get a bigger expense agianst income.

Thanx

Answer 3

You can depreciate the dump truck over it's IRS determined lifetime. The depreciation is an expense that lowers profit that means less tax.