My numbers as an O/O leased to Crete

I have seen this error before from tax preparers (usually at the big box stores) that try and prepare truck driver returns. In every case I have found they (the tax preparer) mis read the depreciation schedule. As I understand it an enclosed box truck would be a 5 year depreciation and a class 8 "tractor" is a 3.

I do appreciate the info you have posted and would suggest getting a "second opinion" from an enrolled agent (even doctors get 2nd opinions). I have a few other CPA contacts and they are all in agreement; "class 8 tractors are indeed a 3 year depreciable asset."

Ultimately it is the taxpayer that catches the fines and penalties for any errors made on the tax return even if it was completed by someone else. You are working way too hard to get tripped up by something like this. Good luck!

 

One factor to consider is when the tractor is sold.

The true and correct depreciation is to be used. Therefore, if the method that is being used is not the correct method, the IRS can change to the correct method and adjust the tax return and reflect higher gain which results in the the taxpayer being charged additional tax.

A five year life on this type of asset is probably based on the financial accounting method used in the larger business. It keeps the dollar value of the asset higher until it is sold. It does not reflect the true depreciation or value of the asset.

 

An "allowance" is by definition an allowance; what's allowed.

Everyone gets a standard 10k deduction even with the most basic taxes. They don't come back and audit how it was used and tax it if it wasn't.

 

I think the key is with older tractors you will have a higher maintenance budget and expenditures in years 4, 5, and so on until you sell the vehicle which should offset the lost depreciation.

Years 4 and 5 are usually when new business owners start building a shop or coming up with other "write offs" to shield their earnings from the tax man. A good CPA will help guide you through this time.

Most new companies have such a high failure rate that the accelerated depreciation method rate gives these fledgling companies an opportunity to start turning a profit before Uncle Sam steps in.

You are correct Kevin Rutherford advocates the 3 year depreciation method but then again so does John Turner, PBS tax service, and RKMS tax service aka "The Tax Lady" (a former IRS agent who now does tax returns for truck drivers).

I use several sources to make sure I have the most current information available as well as reading the IRS web site itself when I am unclear on something or I hear conflicting reports.

Of course it is your business and you will use whomever you trust to advise you.

 

IRS dictates 3 years on tractors.....not an option.

 

The table you referenced is Class Life of 4 years, not depreciation life. It is the second column.