If your business was active in 2019, you can claim all related ordinary expenses even if you did not have any income yet. The cost of the truck is not an expenses. The truck is a fixed asset which has to be depreciated.
Please note that your single member LLC is a disregarded entity and its income and expenses can be reported on Schedule C of your personal tax return.
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you have depreciation choices for the truck
Sport Utility Vehicles
SUVs are considered trucks, so SUVs that are less than 6,000 pounds are subject to the Sec. 280F depreciation limits for trucks and vans. However, SUVs over 6,000 pounds gross vehicle weight are not subject to the Sec. 280F limits. SUVs that fall into this category also qualify for the full amount of bonus depreciation allowed in the specific year. In addition, under Sec. 179(b)(5), a Sec. 179 expense deduction of up to $25,000 can be taken for an SUV that is rated at more than 6,000 pounds but not more than 14,000 pounds gross vehicle weight (loaded). No depreciation or Sec. 179 limits apply to SUVs with gross vehicle weights over 14,000 pounds, but very few SUVs are that large. So even though SUVs are not the most practical business vehicles, it might be worth thinking about purchasing one for the depreciation benefits. An SUV over 6,000 pounds gross vehicle weight provides a much larger potential cost recovery benefit than one under the weight limit that qualifies as a passenger automobile.
Trucks and Vans Over 6,000 Pounds
There is no limit on regular and bonus depreciation for trucks and vans that do not qualify as passenger automobiles. As with SUVs, the Sec. 179 expense deduction for trucks and vans rated at more than 6,000 pounds but not more than 14,000 pounds gross vehicle weight (loaded) is $25,000. However, the limit does not apply to trucks and vans in this weight class if the vehicle:
- Is designed to have a seating capacity of more than nine persons behind the driver's seat;
- Is equipped with a cargo area 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; or
- Has an integral enclosure, fully enclosing the driver compartment and load-carrying device, does not have seating behind the driver's seat, and has no body section protruding more than 30 inches ahead of the leading edge of the windshield.
This means that no limits apply to the Sec. 179 expense deduction or bonus depreciation under Sec. 168(k) if one of these exceptions applies, which will allow many taxpayers to deduct the full cost of a vehicle in the year of purchase. Practitioners must be aware of these definitions to ensure that the Sec. 179 deduction limit is not improperly applied
if it is classified as a truck you can fully depreciate it the first year by taking either Section 179 depreciation or Section 168(k) depreciation. However, the actual deduction under 179 is limited to net income from the business, so in effect, you would get no deduction for it in 2019. The deduction would be carried forward to 2020 and again limited to net business income and so on. On the other hand section 168(k), bonus depreciation has no income limitation so you would get the full deduction in 2019. You can elect out of bonus depreciation.
what I am trying to point out is that if you are in a low tax bracket in 2019with the full cost f the truck deducted and in 2020 you expect to have a lot more income that will put you in a higher tax bracket and subject you to self-employment taxes, then you may not want to maximize the depreciation deduction. in addition, in 2019, since the business will operate a loss, fully depreciating the truck will produce no savings in self-employment tax. Then 2020 rolls around and you have income from the business. this income will be subject to self-employment tax. the loss from 2019 can not be used to offset it. the first $144,000 in self-employment income is subject to an effective self-employment tax rate of about 14.1%. in addition, there is the regular income tax on the business income.
additional complications arise if you will have a net operating loss for 2019. if so, you may want to consult a tax advisor, so you can be fully advised on the various options.
This is great information - I have a cargo van which qualifies and I want to use the bonus 168(k) - however I cannot figure out how, in turbo tax home and business - where I put this information - under assets it says "not for vehicle" and for vehicles it only asks if it's over or under 6000 GVW - so how do I get this added?
Both the dump truck and the cargo van are reported in the business expenses section, more specifically in the "Business Vehicle Expenses" section. Period. End of Story.
I guarantee you that both vehicles meet one of the selections in the pull down menu. The selections are:
- Auto under 6000 lbs
- Light Truck, Van, SUV under 6000 lbs. This could be your cargo van
- Truck or Van over 6000 lbs. This could be the dump truck
- Heavy SUV over 6000 lbs
- Heavy Truck over 13,000 lbs This could be your dump truck, if it's a big one
- Truck/Tractor for over the road use.