USA Depreciation on Truck


Joined
Apr 21, 2019
Messages
10
Reaction score
0
Country
United States
I have no experience with depreciation and someone asked me this. He bought a truck on 12/15/2020 and it's used 100% in his business. If I'm reading the regs right, he would depreciate using MACRS and a mid-quarter convention. But it also looks like he could take bonus depreciation up to the entire amount of the truck cost ($52,000) in 2020 because it's a heavy truck? Thanks.
 
Last edited:
Ad

Advertisements

Joined
Aug 19, 2021
Messages
12
Reaction score
0
Country
United States
Depreciation is where the government allows you to recover the cost of investing machninery, vehicles, equipment into your company. If he paid $52,000 for the truck, he can deduct his depreciation amount from his taxable income, Thereby lowering his tax liability. He could use straight-line depreciation schedule, where he would take about 20% of the $52,000 each year or $10,400 per year for 5 years when it will be fully depreciated. He could also do what is referred to as a 179 expense form of depreciation where he could depreciate the who le $52,000 in one year. This would be advantageous if he made a very large amount of money in the year. It would greatly reduce his tax bill. The disadvantage is that he would not have any deprfeciation to write off over the next five years, making his tax liability a lot higher than if he could write off some depreciation. In either case once his truck is fully depreciated, if he sells it he would no longer have any basis to claim to lower his capital gain amount. Meaning if he used all of his depreciation and then sold the truck for $20,000, that would be his capital gain that he would have to pay taxes on.
I hope this helps you and him out.

Mr. Leslie Linear-Linkedin & (e-mail address removed)
 

Ask a Question

Want to reply to this thread or ask your own question?

You'll need to choose a username for the site, which only take a couple of moments. After that, you can post your question and our members will help you out.

Ask a Question

Similar Threads


Top