Things You Should Know Before Buying A Truck

October 27, 2020


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Video Transcription:

All right, so you’re going to buy a truck or an SUV, a heavy-duty vehicle over 6,000 pounds GVWR. How should that work if you’re buying it for a business purpose? Well, I’m Donna Bordeaux with Calculated Moves and there are some extra considerations we make when we buy a large vehicle. First off purchasing a large vehicle is considered to be a piece of equipment and no longer a luxury car. So different rules apply for depreciation purposes. If you’re going to be using this vehicle over 75% for business use, and that is based on mileage and just a little caveat, you still have to track mileage, no matter how you do this. So you can’t get out of it one way or the other. But if you’re going to be using that vehicle over 75% for business use, you may be eligible to take a nice giant chunk of the purchase price in one year as an expense.

Now it’s not truly an expense, but we’ll say it is because it’s treated the same way. It’s going to be a chunk of depreciation, section 179 deduction. Or sometimes we have bonus depreciation in play that allows us to do similar things. So you’ll want to verify before you buy that vehicle, how it’s going to affect you from a tax purpose Secondly if you’re trading in a vehicle right now, the tax code does not make a very good idea on the trade-ins. I’d suggest that you sell it, whether that’s outright, or do it in a separate transaction to the dealership, rather than make a trade. Those things will help you tremendously when we get to the tax side. So definitely if you are a VIP client or would like to be one, we can fully discuss the best way for you, but in general, you will want to separate and not do a trade-in next up.

Let’s talk about how this affects your decision and how do you buy it either through the business or personal. If you’re buying this as a business vehicle, you will do very similar things. However, insurance and financing rates may be a little bit higher as a business rather than a personal effort to buy. So those are things to consider when you’re talking with your dealership or your bank and determine what the rate difference would be if you bought it personally versus through the business. Secondly, also, as I mentioned, check with your insurance agent and see what those differences are. If you will have anyone else driving this vehicle besides you and employee, or I hate to say it, a contractor, that’s a whole different, decision, and problem area. But if you will have someone else, besides you driving this vehicle for business purposes, I strongly suggest that you have business insurance, business, license plates, and own that vehicle through the business.

The titling is not necessarily the big issue here, but it may come into play. When we’re talking about the insurance side of this, if that vehicle is involved in an accident, gets a speeding ticket, into any sort of issue, that involves licensing or insurance and you have an employee driving it for business purposes, but you don’t have business insurance. There’s a lot of trouble there. So be careful of that. Don’t try to cheap out on that, make sure that you’re well protected there. All right, if you’re buying a vehicle over $75,000, which unfortunately it’s not that difficult to get there now. There’s some extra considerations part of that may not be fully expense. So talk to us about that before you do the purchase, the biggest piece of advice I will give you is talk with us before finalizing a purchase of a vehicle. The time to talk with me is when you’re thinking about it, or when you’re shopping, sometimes we can’t undo things. If they’ve already been done and we reached the end of the year. So please, this is an area I want to help you in. Talk to me before the purchase happens and let’s make sure that everything is lined up so that you get the best outcome. Thank you very much. I’m Donna Bordeaux with Calculated Moves.

Donna Bordeaux, CPA with Calculated Moves

Creativity and CPAs don’t generally go together.  Most people think of CPAs as nerdy accountants who can’t talk with people.  Well, it’s time to break that stereotype.  Lively, friendly and knowledgeable can be a part of your relationship with your CPA as demonstrated by Donna and Chad Bordeaux.  They have over 50 years of combined experience as entrepreneurial CPAs.  They’ve owned businesses and helped business owners exceed their wildest dreams.   They have been able to help businesses earn many times more profit than the average business in the same industry and are passionate about helping industries that help families build great memories.