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Wallstreet Esq.
Wallstreet Esq., Tax Attorney
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I am purchasing a used vehicle (cost = $12,000) which I will

Customer Question

I am purchasing a used vehicle (cost = $12,000) which I will be spending $12,000 to upgrade. I am then renting that vehicle out.
What are the depreciation rules for such a scenario?
Submitted: 1 year ago.
Category: Tax
Expert:  Rick Martin replied 1 year ago.

Hi, I'm happy to help. Are you referring to the tax accounting rules or the book accounting rules?

Customer: replied 1 year ago.

Tax. I'm doing a financial model for a vehicle rental business. I imagine the purchase price is 5 years and the cost of repairs is in the year those are realized?

Expert:  Rick Martin replied 1 year ago.

What type of vehicle, electric, passenger, van, truck? So you're buying the vehicles and renting them out and need to know what you as a business can write off, correct?

Expert:  Rick Martin replied 1 year ago.

It is correct that cars represent 5 year property, but the amount that can be deducted each year is different. Publication 946 is the relevant guide for your question, but the answer depends on a lot of things, and there are exceptions for leased property. Here is a link to the publication.

Customer: replied 1 year ago.

They are camper vans, but not RVs. VW Camper vans to be exact. Used vehicles. I understand what I Can write off, just curious about the actual depreciation for the vehicles themselves.

Expert:  Rick Martin replied 1 year ago.

I see, so you understand the tax write off. You need to know when, from a business standpoint, for modeling purposes, when should the camper vans be considered used up. Is that right?

Expert:  Mark Taylor replied 1 year ago.

Hi, my name is Mark. I will be happy to help you with your questions. The $12,000 that you spend to upgrade the vehicle would be added to the basis of the vehicle. This would be depreciated over 5 years.