Depreciation Expenses

[thecasino5]

Hi all! I am refining my business plan and am having trouble calculating my depreciation for a new Washworld Profile Max with all the bells and whistles. Currently I have it depreciating at a yearly rate of $16,700 because of a business plan writer I had help with my plan. Please let me know if I am completely off and how I should properly calculate deprecation for this machine.

 

[Greg Pack]

No tax expert but I believe that equipment would be depreciated on a seven year schedule. CAr wash buildings are special purpose and can be depreciated over 15 years.

 

[Keno]

Also not a tax expert but I believe new equipment can be depreciated 80 percent in 2022 due to bonus depreciation. Consult a CPA that specializes in small business with a good reputation. They will save you way more than they charge you vs trying to do it yourself

 

[MC3033]

2022 is the last year of 100% bonus depreciation. Starting next year it will be 80% and drop 20% each year until there is no more bonus (unless new legislation is passed)

 

[Toms PTcarwash]

Talk to an accountant. You need to be a bit careful. If you bought it outright, you can depreciate it over 7 or 15 years I believe (i am not an accountant). If you took a loan, you can deprecate it and the interest, but you can't deduct the yearly interest costs. If you leased it with a $1 buyout at the end of the lease, you can deduct every $ of lease payment every year.

 

[soonermajic]

What is this "bonus" depreciation you guys are talking about?

 

[Keno]

It’s part of the tax cuts and jobs act. There are a lot of rules, but basically any equipment purchased for business purposes can be depreciated 100% in year 1. Best to consult a CPA if anyone is going to take advantage of this tax break.

What is this "bonus" depreciation you guys are talking about?

 

[soonermajic]

Why would you wanna depreciate it 100% in 1 yr?

 

[Car_Wash_Guy]

Why would you wanna depreciate it 100% in 1 yr?

Reduce your taxable income.

 

[soonermajic]

Reduce your taxable income.

Correct me if Im wrong, but won't u just pay more the following yr?

 

[Keno]

Depreciation counts as an expense as far as Uncle Sam is concerned, so it will reduce your taxable income now. You will not have to pay for it the next year, the only time you might have to pay for it is if you sell the property for a profit as depreciation recapture - but usually that is a lower tax rate than what you would be paying now. This is all part of tax planning that a CPA should be guiding a business owner with.

 

[Roz]

If you depreciate over one year or over multiple years your total depreciation number is the same.

The reason to do one year is that you can carry forward any unused depreciation so it will be available in following years if you do not use it all in the first year. Keep in mind that different things have different depreciation tables buildings are a longer term table and items that diminish in value with time like wash machines have a much faster table.

Some people like to spread it over multiple years because the amount taken each year is just right to move them from one tax bracket into a lower tax bracket. other people want to use the entire amount to maximize their savings in year one because money in hand today is worth more than money in hand next year. Given the low interest rates on savings and the stock market collapse it may not make much of a difference. But ask your CPA.

 

[soonermajic]

All very interesting stuff. Thanka guys

 

[eckert16]

Your accountant is more likely up to date on the Current depreciation rules which can change with every congress. Your tax advisor and your accountant together....awesome for staying legit in reducing your tax liability.