I’ve been doing some research on starting a business. My main question (which will be answered in the future by an accountant, I’m just impatient) regards vehicle purchasing. Is there an age limit on a vehicle that can be deducted for tax purposes; meaning, do I have to buy a brand new vehicle to deduct the cost over a three year period, etc. I was looking at a 2003 truck, but if I can’t deduct it’s cost basis, it’s not worth it to me. Obviously, I’d like to save money by purchasing an older vehicle but the savings would be negated if I can’t deduct it.
Thanks!
Disclaimers: I am not an accountant or tax guy. Based on my advice, you might go to jail. Not valid where deemed invalid. Blah, and blah.
From my own tax experience, a vehicle need not be new to be expensed. When you reach the form for deducting vehicle expenses, you will enter the “basis” for the vehicle, which is what you paid for it, the date when the vehicle was placed in service, and can then select one of several methods to depreciate the vehicle, as well as fuel, tolls, repairs, and so forth.
The tax software I’ve used gave me the option of seeing what each method delivered in the first year before making the selection. You will need to remember the method chosen in your initial year, as that will limit your options in subsequent years. The real key to all of it is having good records, including business mileage, personal mileage, receipts for repairs, and so forth. Using a record keeping program such as Quicken will make life easier, although you can do the same things, and customize the result to your liking in Excel, if you’re fluent in that program.
IME as a business owner, mileage method is more of a PITA but you get a larger deduction than itemizing it all.
In my case it averaged out to about $600/year more deduction for tracking miles. For $50/month I will skip the log books.