$10,000 paint job

You could have two trucks, one with new paint and fancy interior. Then have another truck new rubber , new engine with paperwork ok paint ok interior , most people will take the first one , they take the fancy paint not good maintenance which is key in trucking where a 15 air govenor can shut your whole truck down. And batteries I replaced mine every two years cuz anything after that is borrowed time.

 

I'm pretty sure that you can do either or (expense or depreciate) without getting into trouble with the IRS. The decision to go one way versus the other just depends on how you choose to run your business. HOWEVER, once you choose a method you have to stick with it. You can't expense it one year and choose to depreciate the next. (You could depreciate for x amount of years and expense the remaining sum though). By treating it as an expense you lower your AGI for that year in one big sum. Depreciation, on the otherhand, expenses your truck/asset over multiple years. Both pretty much have the same effect at the end of the day ie; 10k x 1yr = 10k or 2k x 5yrs = 10k. A special note of consideration is that depreciation is affected by differing tax rates from year to year and also which tax bracket you're in during that corresponding year. All the IRS is mainly concerned about is that you're not inventing income/expenses. Where you represent that information on your taxes isn't as important so long as it's represented ONCE and the final calculations are legit.

 

Just to clarify some mis-statements above...

A. sec 179 can only be used in the purchase year of the new/used/some times leased equipment (and limited software). It can never be used for existing assets.

B. The IRS is concerned with revenue/ expense matching. That is why we depreciate (expense) a portion of the assets life each year in which profit was recognized (not expenses were realized)

C. The IRS only cares about collecting taxes owed through application of the tax code. The first page of the tax code states that all revenue regardless of origin is taxable unless specifically relived of tax burden in the code.

D. There is a considerable difference in depreciation where straight line, declining balance, etc and even whether you use MACRS, ACRS, mid-month, mid-quarter, half year or end of year convention.

As far as the paint job... it's a considerable expense beyond routine maintenance and should be capitalized and depreciated using the method your tax advisor suggests for the best length of time for your situation. ie, I see a ton of 1985 4 axle dumps running up and down the interstate but I can't recall the last 1985 otr truck I passed. A bit over the top, but you get the gist of it.