Q: Abe! I was wondering if I should lease a truck or try to purchase one outright. What are some of the differences that I might see for my taxes?
A: This is a great question! The good news that whether you are making lease payments or purchasing outright, this is considered an ordinary and necessary business expense. But how these expenses are deducted from your tax return can be different.
Often with leasing contracts, a weekly rate is set for the expense of the truck payment, and is this is deducted similarly to any other business expense on a Schedule-C Profit-and-Loss statement. Each week the expense is deducted until the full cost of the truck has been paid for.
When purchasing a truck, you can depreciate the cost of the vehicle since you will own it outright. When looking at depreciation, you have both a one-year option to depreciate the full cost of the vehicle in a single tax year or depreciate the cost over the useful life of the vehicle, which is often set at three years. In either scenario, the full cost of the vehicle is depreciated, however, you will want to take full consideration of your business and finances as to whether or not one-year depreciation or three-year depreciation is more beneficial to your business.
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We are here to serve you and your business. Contact us today by calling 417-380-5000, or visiting our website at www.abacustrucking.com.