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For those of you that own your business:
What is better for purchasing vehicles and tax write offs,
1. leasing a company truck what is the advantage?
or
2. purchasing a company truck what is the advantage?
all for tax reasons
And should it be bought under my compnay name or personally?
Jeff
I always lease my trucks, I plan on running them 4-5 years and selling them private party, you have less of a down payment with a lease and you don't pay all the sales tax up front you pay tax monthly, My lease's are 15% down 48 payments and 10% residual, I have always been right-side up at about 40-44 months.
what kind of annual mileage do write in to your leases?
We write them with 15k, It kinda doesn't make a difference because you are not giving them back to the leasing company, What kind of trucks are you leasing? Mine are F650 Flatbeds, My last were over 150k miles and I sold them for double my payoff.... try to figure out the math and get your residual and then look on truck trader for 4 year old trucks and see what they are selling for.....
Do a capital lease. Same benefits as buying(make sure you get the one dollar buyout), plus it allows you to take advantage of section 179 deductions(advanced depreciation rates for tax purposes).
For those of you that own your business:
What is better for purchasing vehicles and tax write offs,
1. leasing a company truck what is the advantage?
or
2. purchasing a company truck what is the advantage?
all for tax reasons
And should it be bought under my compnay name or personally?
Jeff
Talk to your CPA. That's the best advice.
When you purchase, you get to write of the depreciation. There are many different depreciation schedules including benefiting from Tax Code 179 and the bonus depreciation that it has been offering over the past couple of years. Not sure if that was renewed for 2007 though.
When leaseing, you need to think on whether or not you will be turning in the vehicle or buying it out. With a $1 buyout, it's just like a purchase. You write off the depreciation. With leases such as a FMV or 10% option. You get no depreciation write off but you expense the payment because you are technically renting the vehicle. How many miles do you put on your vehicle. There are a lot of questions that need to be answered to find what is best for you and your company.
My pitch: We offer unlimited miles on ALL our leases whether it be FMV, 10% or any other end valuation.
Talk to your CPA. That's the best advice.
When you purchase, you get to write of the depreciation. There are many different depreciation schedules including benefiting from Tax Code 179 and the bonus depreciation that it has been offering over the past couple of years. Not sure if that was renewed for 2007 though.
When leaseing, you need to think on whether or not you will be turning in the vehicle or buying it out. With a $1 buyout, it's just like a purchase. You write off the depreciation. With capital leases such as a FMV or 10% option. You get no depreciation write off but you expense the payment because you are technically renting the vehicle. How many miles do you put on your vehicle. There are a lot of questions that need to be answered to find what is best for you and your company.
My pitch: We offer unlimited miles on ALL our leases whether it be FMV, 10% or any other end valuation.
Under a capital lease the asset is "capitalized". Capitalize the asset that is effectively yours & ammortize the liability as you pay(not expensed) this allows the depreciation...
Let's get to the downpayment benefits. Generally when you purchase by loan, a bank will want to see a down payment of about 20%.
When you lease or go through an equipment finance company, you can finance 100% of the purchase price, tax, and anything you will be putting in or on that truck. There is no money out of pocket.
Under a capital lease the asset is "capitalized". Capitalize the asset that is effectively yours & ammortize the liability as you pay(not expensed) this allows the depreciation...
I was hoping I got to that correction prior to somebody quoting me. :D
Not knowing many facts about your biz...What I did was;
When I purchased my Box trucks (used) I expensed the entire amount and took the write off in one lump sum.
I think last year was it for that though so youre back to depreciation over time now. This was a Bush stimulate package deal. I purchased 4 vehicles under those guidelines. Helped taxes somewhat.
Very common in a commercial lease is a dollar buy out at the end or one with a very low residual. The lender really does not want it back. 100% business vehicle is a 100% write off.
You can also claim miles but its either/or not both. Miles is near .40 per this year I think.
Consult your CPA.
Purchase truck with cash, use section 179.
Not knowing many facts about your biz...What I did was;
When I purchased my Box trucks (used) I expensed the entire amount and took the write off in one lump sum.
I think last year was it for that though so youre back to depreciation over time now. This was a Bush stimulate package deal. I purchased 4 vehicles under those guidelines. Helped taxes somewhat.
Very common in a commercial lease is a dollar buy out at the end or one with a very low residual. The lender really does not want it back. 100% business vehicle is a 100% write off.
You can also claim miles but its either/or not both. Miles is near .40 per this year I think.
Consult your CPA.
The section 179 bonus rates promote a timing difference only. In the end you gained nothing, but its all about the timing. In good years, you buy assets to grow the business, use the section 179 deductions to adjust income down.
If the lease does not have the one dollar buyout, it is not capital and is instead termed an operating lease which is not subject to the section 179 deductions. Other requirements for a capital lease include:
lease transfers title to the lessee at time of sale, lease term is 75% or more of the useful life of the lease, & the PV of the minimum lease payments (MLPs) is 90% or more of the FMV of the asset retained by the lessor.
Section 179 deduction limit is 112k for 2007. Same for 08 & 09 but with COLA adjustments.
Purchase truck with cash, use section 179.
Id leave my cash alone and bank the interest. You'll get a better return with your money in a mutual fund right now compared to the interest you will pay on a lease...:idea:
The section 179 bonus rates promote a timing difference only. In the end you gained nothing, but its all about the timing. In good years, you buy assets to grow the business, use the section 179 deductions to adjust income down.
If the lease does not have the one dollar buyout, it is not capital and is instead termed an operating lease which is not subject to the section 179 deductions. Other requirements for a capital lease include:
lease transfers title to the lessee at time of sale, lease term is 75% or more of the useful life of the lease, & the PV of the minimum lease payments (MLPs) is 90% or more of the FMV of the asset retained by the lessor.
Section 179 deduction limit is 112k for 2007. Same for 08 & 09 but with COLA adjustments.
When was section 179 placed into law? Maybe this is not so new after all?
Have your heard of HBLA in Irvine? I have used them for the past 20 years. I am still a small fish and as they grow even larger I might get thrown back. Might be the year to move on.
Nice explanation by the way. Thanks.:D