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HelloFromMe
Returning Member

Business Vehicle Depreciation

How business vehicle depreciation works? This is my first year and would like to know how does it work? I have 2 vans (7 and 12 passengers) and both are used to transport people from/to the airport form/to a city that is 85 miles (Airport shuttle). They are used 100% for business. How will Vehicle Depreciation work if, for example, one van's monthly payment is $1,000 + other expenses (gas, oil, etc.)? Do I get to deduct all expenses (payment and other) and also vehicle depreciation? Or only vehicle depreciation +  expenses (payment and other) so no payment? Also, for how long the van can be depreciated (2 years, 3, years, etc.)? Is there a depreciated schedule set by the IRS? Both vans' loan are for 60 months. I hope this is enough info about my question. Thank you

4 Replies
rjs
Level 15
Level 15

Business Vehicle Depreciation

For a new airport shuttle business there are a lot of other financial considerations you need to be concerned about besides depreciation of your vehicles. You need an accountant who will guide you concerning bookkeeping requirements, payroll, taxes, etc. Please consult a local accountant as soon as possible. The accountant will explain your options regarding depreciation.


(Since you have two vans, you must be paying someone else to do some of the driving, so you have employees and a payroll, whether you realize it or not.)

 

Mike9241
Level 15

Business Vehicle Depreciation

Another issue the tax pro will go over with you is whether under the tax laws you own the vehicles or are leasing them. there will be a huge difference in the first year's deductions depending on which it is. 

HelloFromMe
Returning Member

Business Vehicle Depreciation

I understand there are other financial considerations besides depreciation of the vehicles and yes I will have an accountant (might be via TurboTax or its partners) eventually but this wasn't my question. If you could explain to me how vehicles depreciation work, would be great. Vehicle loan (owned not leased) is 60K for 60 months -> Monthly payment is 1K. Bought in January. Used 100% for business. Can I use the standard miles per gallon deduction? Thanks for your time again.

Critter-3
Level 15

Business Vehicle Depreciation

Since you own the vehicles your actual monthly payment is immaterial.  You will either use the actual expenses option + depreciation  or the standard mileage rate for each vehicle.   If you start with the actual expenses you are stuck with the actual expenses option you are stuck with that option for that vehicle until you no longer have the property.  If you start with the standard mileage option you can "flip flop" each year to choose the better option.

 

Read up here :  

https://www.irs.gov/newsroom/heres-the-411-on-who-can-deduct-car-expenses-on-their-tax-returns

 

And chapter 4 here :  

https://www.irs.gov/pub/irs-pdf/p463.pdf

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