taxes and deprecation of the truckmount. | TruckMount Forums #1 Carpet Cleaning Forums

taxes and deprecation of the truckmount.

Travis Teague

Well-Known Member
Oct 5, 2016
941
557
93
Real Name
Travis Teague
So I am thinking of adding a second Tuckmount and a second truck/trailer for backup and to maybe run a employee in the summer time. If I purchase this before 12/31/2017 then can I do accelerated deprecation and deduct the entire amount off the taxable income? If so I am thinking upgrading equipment may be beneficial to keeping the taxman out of my wallet. what are your all thoughts on this and how are you all not getting killed by the taxman?
thank you.
 

crash1big

Well-Known Member
Mar 18, 2011
4,258
2,002
113
Illinois
Real Name
Marlan Brown
Business Location
United States
Its a balancing act for sure. I have accelerated depreciation a couple of times but only with the intent of buying new equipment in the near future. Are you planning on financing the purchase? I finance even if I have the money. It's all a tax write off in the end. I like to keep my money and use someone else's, namely the bank.
I just did what you are talking about except I plan on a 5 year depreciation schedule. I think section 179 might allow you to take the full deduction up to 250k if bought and put into place before the end of the year in 2017.
 

Travis Teague

Well-Known Member
Oct 5, 2016
941
557
93
Real Name
Travis Teague
Its a balancing act for sure. I have accelerated depreciation a couple of times but only with the intent of buying new equipment in the near future. Are you planning on financing the purchase? I finance even if I have the money. It's all a tax write off in the end. I like to keep my money and use someone else's, namely the bank.
I just did what you are talking about except I plan on a 5 year depreciation schedule. I think section 179 might allow you to take the full deduction up to 250k if bought and put into place before the end of the year in 2017.
I have less than 2 years in business so I am dead to the banking system. I got a personal loan before I left my day job to help fund this carpet cleaning experiment. the money has been just sitting in the checking account for slow times and emergency's but this is the first spring I will be going through and I don't want to deplete my cash but I have a opportunity to buy a low hour truckmount and lots of extras at a decent price. probably 7k for truckmount and trailer plus all the wands and equipment. guy said he has a bunch of fans he wants to sell as well.
 
  • Like
Reactions: crash1big

ColoradoCleaner

Well-Known Member
Dec 31, 2010
3,453
1,568
113
32
Denver, CO
www.magicwandcolorado.com
Real Name
Kevin M
Business Location
United States
The answer to your question is yes... it is a well known tax avoidance strategy and I used it last year and will use it again this year. It effectively lowers the price you pay for new equipment. It is the government's way of stimulating the economy by getting equipment to good businesses cheaper.
 

astrikingimage

Premium VIP
Oct 20, 2010
710
320
63
NM
Real Name
Jose Salazar
Business Location
United States
if the majority of your puchases are in the last quarter of the year, you will have to depreciate it using the mid month convention.
A way to avoid this is to section 179 the amount you want to depreciate.
 

Travis Teague

Well-Known Member
Oct 5, 2016
941
557
93
Real Name
Travis Teague
if the majority of your puchases are in the last quarter of the year, you will have to depreciate it using the mid month convention.
A way to avoid this is to section 179 the amount you want to depreciate.
can you explain this mid month conversion more as well as the 179?
thanks
 

Scott W

Preferred Vendor
Premium VIP
Feb 14, 2006
16,322
6,892
113
67
West Jordan, UT
www.interlinksupply.com
When you purchase equipment for your business, you will be able to take the cost off as depreciation. The question is when does that cost come off. There are at least 5 options. Some let you have the deduction sooner. Your tax accountant may tell you what works best for your situation.

Section 179 allows you to take the full amount of the purchase off in the year you started using the equipment. So, if you purchase a truckmount now and start using it by Dec 31st, you could deduct the full depreciation from your 2017 tax return. The current maximum amount for this is $250,000 worth of equipment purchased in a year.

Other forms of depreciation spread the cost over 3, 5, or 7 years. The cost may be spread evenly over those years or there may be more depreciation up-front and less in later years. Think of how much value a new car loses the day you drive it off a lot. These methods are known as declining balance or double declining balance formula. I think there are a few others as well.

Most commonly depreciation is figured by the years you own something. Own it for just part of a year and you may still do the calculations as though you owned it all year. But if most of your purchases were made later in the year, and you don't use the section 179 method, your depreciation is calculated by months. You start on the 15th of a month (mid-month) in doing these calculations.
 
  • Like
Reactions: Luky

Jimbo Williams

Active Member
May 11, 2009
271
59
28
50
NC
precisionsteamcleaning.com
Real Name
Jim Williams
Business Location
United States
Like you I am doing a 179 deduction. I had saved up this years tax money, but decided my 14 year old van and truckmount are on their last leg, so it would be a good time to put a big down payment on a new rig. I picked up a 2014 Chevy van and am getting a TCS Warrior installed next week. It was stressful trying to get my bank to wrap it up in time for the deduction. You are cutting it a little close too with only one week left in the year, but since you already have the money ready to go you should be good. Since you are buying used you might want to get a receipt from the seller for tax purposes.
 

ColoradoCleaner

Well-Known Member
Dec 31, 2010
3,453
1,568
113
32
Denver, CO
www.magicwandcolorado.com
Real Name
Kevin M
Business Location
United States
Just wanted to add for accuracy the maximum Section 179 depreciation amount for 2017 is actually $510,000. Here's a link... you can see it about halfway down.

https://www.irs.gov/publications/p946

"Section 179 deduction dollar limits. The maximum amount you can elect to deduct for most section 179 property you placed in service in tax years beginning in 2017 is $510,000. "
 
  • Like
Reactions: Scott W

Scott W

Preferred Vendor
Premium VIP
Feb 14, 2006
16,322
6,892
113
67
West Jordan, UT
www.interlinksupply.com
Depending upon your tax bracket and your state tax situation, you can basically get the government to pay 25 to 45% of the cost of a new truckmount. Instead of $25,000, you may only pay $15,000 when you consider the $10,000 you save on taxes.
 

ColoradoCleaner

Well-Known Member
Dec 31, 2010
3,453
1,568
113
32
Denver, CO
www.magicwandcolorado.com
Real Name
Kevin M
Business Location
United States
Thanks for the corrected information, @ColoradoCleaner
You bet and actually I just read the the new tax law that Trump signed today increases Section 179 expensing to a cap of $1Million per year. Such a great tool and I'm so excited for this new tax law... will let us keep more money, simpler, and clients will have more money too. Economy is about to expand like few times in history.
 

Travis Teague

Well-Known Member
Oct 5, 2016
941
557
93
Real Name
Travis Teague
Thanks for the corrected information, @ColoradoCleaner
You bet and actually I just read the the new tax law that Trump signed today increases Section 179 expensing to a cap of $1Million per year. Such a great tool and I'm so excited for this new tax law... will let us keep more money, simpler, and clients will have more money too. Economy is about to expand like few times in history.
Man I hope so. I'm excited for a killer year in 2018.
 

Dougie "fresh-clean"

Active Member
Oct 10, 2012
103
29
28
Memphis, Tennessee
Real Name
Doug Nelson
Business Location
United States
Leased new TM last year... section 179 instead of claiming lease payments as equipment rental expense? Can you also deduct mileage in either case? (hiring an accountant this time but curious what people do)
 

Allied

Life is good!
Premium VIP
Jun 18, 2013
5,455
2,332
113
Down Yonder
Real Name
Simon Bolivar
Business Location
United States
Leased new TM last year... section 179 instead of claiming lease payments as equipment rental expense? Can you also deduct mileage in either case? (hiring an accountant this time but curious what people do)
What we did last year isn't going to be the same as this year. Just make sure you are using a CPA well versed in bidness tax filings.
 

Scott W

Preferred Vendor
Premium VIP
Feb 14, 2006
16,322
6,892
113
67
West Jordan, UT
www.interlinksupply.com
Leased new TM last year... section 179 instead of claiming lease payments as equipment rental expense? Can you also deduct mileage in either case? (hiring an accountant this time but curious what people do)
Best to check with someone who knows small business taxes. (Not all CPAs focus on taxes.) I did tax accounting several years ago. Mileage deduction was only allowed for 1 vehicle per person / business. Full mileage rate included depreciation, so one could not take section 179 or other depreciation and also take mileage deduction.

I do not think that has changed, but best to consult someone who is current with tax law for your business (I assume sole proprietorship, but could be different rules if you are S or C corp or LLC.)