Major Purchase Items
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Major Purchase Items

Is a John Deere tractor and implements considered a major purchase for my second home in the mountains on 5.5 acres? If so, what category? Vehicle? off-road vehicle?

2 Replies
Employee Tax Expert

Major Purchase Items

Is your second home a rental property? Is the tractor needed to maintain the property? It would not be considered a business vehicle. A tractor would be added as a machinery asset and depreciated accordingly. However, only as a business deduction against the rental and if it fits the test for a business expense. If the second home is a personal residence only, the tractor is not deductible.

 

There are three common tests for deductibility of business expenses:

  1. Ordinary and Necessary - The expense must be ordinary and necessary. Generally, this means that the expense is commonly found in the specific business, and is helpful and appropriate in running the business.
  2. Business Purpose - Expenses must have a legitimate business purpose to be considered deductible.
  3. Reasonableness - The tax law requires that the deductions be reasonable to be deducted.
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Level 15

Major Purchase Items

The poster may be asking whether the sales tax paid on a tractor can be considered a major purchase for the purpose of adding the sales tax paid to the table amount of sales tax for the sales tax itemized deduction. If that is the case, the tractor could possibly be considered an off-road vehicle but a tractor is usually not included in the descriptions of off-road vehicles.  The IRS does not describe what can be included as an off-road vehicle in the Schedule A instructions.

 

If the poster lives in a state with a state income tax, the state income tax will almost always be higher than the sales tax and so the sales tax deduction would not be used if that is the case. 

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