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» From: McAllen, TX Dear TaxMama: 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? Richard 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. Depending on the price, you probably won't be able to write them off in one year. (See IRS Pub., Electing the Section 179 Deduction) Typically, you can write trucks off over 5 years. Do NOT use the automobile depreciation rules. They do not 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. For 2002, the maximum amount is $24,000. So, that might just let you write off the entire cost of your trucks, if they're relatively cheap. And then, due to the legislations after 9-11, any equipment you buy before 9-11-04 can get an extra 30% depreciation, before you use the tables. (IRS Pub: Special Depreciation Allowance) Watch out for this, though. Many states haven't agreed to accept this, so you may find differences between your IRS and state tax returns if you use this. (Never mind, Texas doesn't have state tax returns.) Anyway, read the information in the links I've provided. It will give you a good idea of how this works. Incidentally, if you're going to have employees, and they will have to travel overnight, have them read Publication 463 - scroll down to Special rate for transportation workers. Best wishes, Eva Rosenberg Your TaxMama  |
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