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IF WE bought a new small tractor in 2017 and financed it for…

Customer Question
IF WE bought a new...
IF WE bought a new small tractor in 2017 and financed it for 5 years zero interest, can we wait
until when doing 2018 taxes to depreciate it out and then can we depreciate it all in one year even if it is financed for more years?
Submitted: 1 month ago.Category: Tax
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Answered in 1 hour by:
3/20/2018
Tax Professional: Carter McBride, Certified Public Accountant (CPA) replied 1 month ago
Carter McBride
Carter McBride, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 1,038
Experience: Adjunct Professor
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Hey! I'm Carter, I'm a CPA and can help you out with this.

You need to start depreciating it when you put it in service. So, if you bought it in 2017, but did not start using it until 2018, then you are allowed to start depreciating it in 2018.

If it is 2017, you still have IRC 179, which allows you to depreciate all of the asset right away if you have positive net income. If you bought the asset after late September, then it is eligible for 100% bonus depreciation.

Let me know if you need anything else. If not, please leave a rating. Thanks!

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Customer reply replied 1 month ago
Okay so if we depreciate it for 2017, can we do a two year depreciation? What is the income amount allowed?
Tax Professional: Carter McBride, Certified Public Accountant (CPA) replied 1 month ago

The tractor will be 5 year depreciation.

If your company had positive net income, you can take IRC 179 depreciation for 100% of the assets value. However it cannot reduce net income below $0.

If that's not an option, you can take 50% bonus depreciation (100% if bought after late September 2017) and then depreciate the remaining amount over 5 years.

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Tax Professional: taxmanrog, Certified Public Accountant (CPA) replied 1 month ago
taxmanrog
taxmanrog, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 1,033
Experience: Licensed CPA, MA, MST with 31 years' experience. Teach Accounting and Tax courses at Masters level.
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Hi! Different expert here. I've been working in taxes for over 33 years, and have several farms as clients.

If you have a loss in 2017, take the IRC §179 deduction anyway. You are allowed to carry over any unused deduction to the next year when you do have profit. For example, if you bought a John Deere 6155RH (I had a client buy one recently) it will set you back about $166,000. If you had $75,000 of income before the §179 deduction, you would be able to zero out your income by using $75,000 of the §179 deduction, and you would be able to take the remaining $91,000 next year. This in effect gives you a two year depreciation life.

Thanks! Let me know if you have any more questions.

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Tax Professional: taxmanrog, Certified Public Accountant (CPA) replied 1 month ago

Did you have any more questions? If so, please feel free to ask and I will be happy to answer.

If you don't, please don't forget to rate me, as that is how questions are closed.

Thanks!

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