Discussion Archives:Depreciation of Vehicle

From TaxAlmanac, A Free Online Resource for Tax Professionals
Note: You are using this website at your own risk, subject to our Disclaimer and Website Use and Contribution Terms.

From TaxAlmanac

Jump to: navigation, search

Discussion Forum Index --> Consumer Questions --> Depreciation of Vehicle


Taxbros (talk|edits) said:

17 January 2007
I want to make sure i am acurate on section 179 for vehicles. When the vehicle weighs over 6000 lbs and used more than 50% in a business, then we can 179 up to $25,000 and depreciate the remaining balance over the next 5 years. Also if the vehicle weighs less than 6000 lbs then refer the luxury limitations for auto deprciation.

Death&Taxes (talk|edits) said:

17 January 2007
Assuming the percentage use allows the 25K, that sounds correct. But if cost is 40K and use is 60%, there would only be 24K of 179.

Kevinh5 (talk|edits) said:

17 January 2007
My calculations would show 60% x $25,000 = $15k max ยง179 in this example. Plus 60% of regular depreciation on the rest, if it were 60% business use.

Death&Taxes (talk|edits) said:

17 January 2007
Uh, oh. When I read your comment, I thought 'that's what you get David when you answer a question without a second cup of coffee for I agreed with you, but opened 2006 Proseries and did the calculation for a truck or van over 6,000 lbs but not a heavy SUV, and used 40K cost with 60% use, inserted 24K in the 179 line and had no error message. I had 2860 of expenses which was reduced to 1716, but the total auto expense was 25,716.

Kevinh5 (talk|edits) said:

17 January 2007
Are you saying the answer is different for a SUV? That my answer is correct for SUV and yours is correct for any other vehicle over 6,000 lbs? Interesting.

Death&Taxes (talk|edits) said:

17 January 2007
Proseries gives these categories: a1. auto under 6,000; a2. light truck, van, suv under 6,000; b1. truck or van over 6,000; b2. heavy suv over 6,000 (which I take to be one that could be fully expensed if cost and use were enough and under $108,000); c. heavy truck over 13,000 lbs and then a category for over the road use truck tractor. Whether I use B1 or B2, it arrives at 24K 179 allowance.

Blackwel (talk|edits) said:

17 January 2007
Isn't % applied to 40k first and then 179? So 24K would be available.

Kevinh5 (talk|edits) said:

17 January 2007
I think that is right, I was just trying to work it in my head. He can take 179 on the business portion up to $25,000 if it is an SUV/etc. He can take higher than $25,000 if it is not an SUV (and those treated as SUVs).

Death&Taxes (talk|edits) said:

17 January 2007
Start of tax season! It's a horrible thought to think my life has descended to: In Software I Trust.

Kevinh5 (talk|edits) said:

17 January 2007
I am the other way - I have in my mind how something should turn out, and if the software doesn't agree I ask "What's wrong with this stupid program?". Sometimes I find it is just like driving - the fault is the nut behind the wheel.

Deback (talk|edits) said:

January 17, 2007
I also got $24K Sec 179 expense for a $40K vehicle used 60% for business.


Has anyone looked at the depreciation reports in ProSeries Pro this year? They are much improved!

Taxhappens (talk|edits) said:

1 February 2007
can u take a deduction for a truck over 6000 pounds that you bought from a relative because your credit is bad

Kevinh5 (talk|edits) said:

1 February 2007
has to be business use

Lcvette (talk|edits) said:

25 February 2007
Hey all, I have a question and am a little fuzzy on it even after reading through all of this.

here goes, I purchased a new truck in 4/05, but took a job in 10/06 as an independent contractor for a building company. my truck is a dodge ram 4 door 1500 over 6000lb GVW, and is used 100% for business only. the vehicle cost new was $29,800. can I use this entire amount on my 2007 returns for the first year depreciation since the vehicle did not get put into service on this job until 1/1/07? I am really trying to figure what I can depreciate and deduct as this is my first good paying job and I am on a 1099 and responsible for my own taxes. any help is greatly appreciated!

Chris

ScottCPA (talk|edits) said:

25 February 2007
Did you mean to say that you want to deduct the whole cost of the truck on your 2006 taxes (rather than 2007)? It sounded as if you placed it in service 10/06.

Either way, on the day you started using it for business, you need to determine the fair market value of the truck on that date. Then, you will have to depreciate the truck over the 5 year life since it was not purchased during the year it was placed in service. So no, you cannot use sec 179 to take the full deduction in first year.

Lcvette (talk|edits) said:

25 February 2007
thatnks guys.. so in essence, I would be better off trading it in and getting a new truck this year with my new job and would be able to use sec 179 and get a healthy deduction. also if you don't mind, is there any difference between a HD2500 truck vs. 1500 std duty both over 6000lb GVW? had one of my subcontractors tell me there was but haven't found anything about it.

thanks in advance!

Chris

ScottCPA (talk|edits) said:

26 February 2007
as long as both trucks have at least a 6ft bed, then no difference, you can use section 179 (1st yr deduction) up to the 105K limit. if one doesn't have a 6ft bed, then it is treated as a "SUV" and is limited to 25k 1st yr deduction

LJACPA (talk|edits) said:

26 February 2007
I always wonder if people really understand what taking Section 179 means. Do they realize that getting this "healthy deduction" one year means that when they sell it they have taxable ordinary income of the entire amount of the selling price? I tend to believe that there are many who take Sec 179 but never report the sale. Would the IRS track something like that?

Death&Taxes (talk|edits) said:

26 February 2007
If you are really gung ho about taking 179, you can only get the deduction in the year you buy the truck and place it into service for business. Trade in the old, but remember the 179 deduction is only on the net cash you lay out after trade in. What I read is that you bought and placed it into service as a personal vehicle in 2005. Scott is right about FMV in Oct 2006 but that must be depreciated, not 179ed. LJA makes great sense too; if the job ceases in 2008-09 and business use falls below 50% you will have to recapture the deduction.

TaxBug (talk|edits) said:

2 June 2007
I recently bought a truck that does have "a cargo area of at least 6 feet in interior length that is an open area or is designed for use as an open area but is enclosed by a cap and is not readily accessible directly from the passenger compartment," (page 17 IRS Publication 463 2006), but it only weighs 4250 GVW. It also says on the same page, "...that is rated at no more than 14,000 pounds gross vehicle weight." That led me to believe that my truck will qualify to be wholly deducted for 2006. However, other references I have read definitely give a min. and max. weight and my truck seems to fall under the minimum of 6,000 lbs. What does this mean - that it only qualifies as a passenger vehicle for which the Section 179 limit for 2006 if $2,960? Or is there something I am missing here? I'd like to know either way as this will determine how much estimated tax will have to pay during the year.

Anton (talk|edits) said:

30 January 2010
I am a contractor in New Mexico (home is Maryland). I am renting a car but want to take advantage of buying a car and depreciate it via form 4562. Is there a minimum period that qualifies (ie. if I'm only a contractor for 6 months vs. a full year)? - Is the maximum applicable amount $10,960 (per TurboTax) for 6,000pounds and under?

Is the calculation: applicable tax rate times 10,960 divided by partial year use (assuming section 179)? Is the usage 100% based on the fact that I own a car in Maryland and anything I do in New Mexico is automatically based on having to be here for this contract work?

This is what I gather in playing with Turbo Tax - would appreciate some expertise on this.

thanks - Anton

Nbuntrock (talk|edits) said:

27 July 2010
New to all of this, but I want to get a truck for my work. It is over the 6000 pound limit. What is the asset type ? I want to 179 the whole amount, but think TT is limiting me to 25k stating state of MN 179 limits ?

I used another vehicle this year so I a am assuming I can still take all my mileage deductions for the year. BUT, starting next year, since I 179ed this truck (assuming I fill out the 179 correct), can I still do the mileage deductions or am I forced to do actuals ?

thx for your help.

Solomon (talk|edits) said:

28 July 2010
Publication 946
Personal tools