Q:

Subject: Section 179 truck depreciation question

Dear Kerry,
  I have a tax question I'm hoping you can help me with.
     We bought a truck in 2006 for our business and are going to section 179 depreciate it's value for the next 5 years. If I deduct $5000 (depreciate) it's value this year, can I deduct more next year, (in the event we make more money and I need more deductions.)
    Is the depreciation set once you place something in service? Is there anyway I can increase the amount on the second or third year?
        The truck cost 22,000 dollars, so it's be nice to depreciate it just enough each year so as to not have to pay taxes. So maybe $5000 this year, and $6000 the next, but maybe only $3000 the third year. Is this possible?
         Please let me know ASAP as taxes are due soon.
                     Thank You,

A:

You can't just change the depreciation methods and amounts each year.  There has to be a consistency.

That said, there are a number of ways in which you can depreciate the truck.  For example, you can use straight line or accelerated regular depreciation.  You can claim part or possibly all of the cost of the truck as Section 179.  If your taxable earned income rules out an actual current year full deduction, the excess Sec 179 can be carried over to be used on the 2007 4562, and so on.

You really need to be working with an experienced tax professional because it is obvious that you are guaranteed to make mistakes that could cost you tax dollars, as well as get you into trouble with IRS. Handling the tax matters on your own is absolutely crazy.

In regard to the tax returns deadline, you are not likely to find a good tax pro in the next two weeks because we are all already swamped.  You should do your best guesstimate of how much you will owe with the 2006 tax returns and send that in with an automatic four month extension in order to give yourself adequate time to locate and start working with a tax pro. 

Good luck.

Kerry Kerstetter

Labels: 179

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 4/08/2007 11:26:00 AM Send this post: