Income Tax Depreciation

[dreadnought]

My accountant tells me she's set my bus up for depreciation over 7 years. I had expected it to be 3 years as all over the road trucks and trailers are, or 5 at the worst. I asked why 7 years and her reply was "because it would not specifically fit in the 3 or 5 year category". The difference in 3 & 7 is worth over $80,000 Lew Bucks in this tax year alone. Please share what your bean counters came up with.

[Jon Wehrenberg]

Dread,

We went with 5 years. I have no idea why the accountant picked that out. I believe part of the reason was to not wave a flag to the IRS, but I don't know that for sure.

From my ill informed perspective I would have been willing to go with any length of time because once we started using the bus for business, we got to vacation and see the country while using the bus to get us to trade shows, and to do seminars on behalf of a large customer.

Maybe your accountant does not want to argue with the IRS.

[merle&louise]

Bill or Jon or any CPA's in the crowd,

How does the tax deal work after the coach has been fully depreciated over 5 or 7 years when you sell it. Do you have to pay tax on the gain: the difference between what you sell it for and the depreciated value? If so, it seems like the IRS giveth and the IRS taketh away.

[Jon Wehrenberg]

If it is depreciated to zero, or some value less than sales price you have to pay a tax on the gain.

What is beneficial about depreciating a relatively new bus is that there is true depreciation, so at least you have the tax benefit of deducting the loss of value, something not possible if you were to use your coach strictly for personal use.

[matsprt]

Tuga,

If book value is zero (fully depreciated out) and you sell it for 200K then you will need to recapture that amount. Now if you buy another bus you will adjust your cost basis accordingly. Really fun stuff, this buying and selling equipment. However it can work to your advantage.

Michael

Bill or Jon or any CPA's in the crowd,

How does the tax deal work after the coach has been fully depreciated over 5 or 7 years when you sell it. Do you have to pay tax on the gain: the difference between what you sell it for and the depreciated value? If so, it seems like the IRS giveth and the IRS taketh away.