I have a 'day job' but in 2012 I started a lawn care and landscape business
on the side. It is a single-member LLC (I am the single member, and I have
taken no paycheck or pay yet), and I have two employees who are on payroll.
We grew quickly and needed a pickup truck to haul equipment to job sites. I
myself used my own credit card to purchase the mowers and a trailer, and I
obtained an auto loan in my own name to purchase a pickup truck this year.
FIRST QUESTION: What number is applicable for taxes this year: A) The total
purchase price of the truck ($10,250), or B) the amount of money I've paid on
the loan since purchase ($3300)?
SECOND QUESTION: How would I deal with depreciation in either case?
DETAILS: Since the pickup truck loan is in my name, I personally lease the
pickup truck to the LLC for exactly the cost of my monthly loan payment. The
LLC pays insurance and other expenses. The truck is 100% used for the
business.
kmurray | Community Moderator |
1/8/2013 - 4:31 pm
Hi there,
BizResearcher makes a great point. Sitting down with a professional can help get you on the right foot and give you the information you need to move forward.
As TaxMan mentioned, you need to be careful in how you handle your tax
reporting when the assets are in your personal name, not the business name.
You may want to sit down with an accountant this first year and have her/him
prepare everything correctly so you don't trigger any red flags with the IRS
or your state tax department.
To answer your first question, you should use the purchase cost as the asset
basis for tax purposes. The amount of the loan repayment has no application
for taxes assuming you file the business on Schedule C. For your second
question, since you use the truck 100% in the business, you can take 100% of
the annual depreciation over 5 years. You can also depreciate the lawn
equipment over 5 years. Caution: if you claim depreciation on Schedule C, do
not deduct the lease payments from the LLC to you unless you also show the
lease payments as income on Schedule E.
At some point, you may want to transfer ownership of the truck and equipment
assets to the LLC to keep everything separated.
kmurray | Community Moderator | 1/8/2013 - 4:31 pm
BizResearcher | Window Shopper | 1/8/2013 - 1:17 pm
reporting when the assets are in your personal name, not the business name.
You may want to sit down with an accountant this first year and have her/him
prepare everything correctly so you don't trigger any red flags with the IRS
or your state tax department.
USA TAX MAN | Window Shopper | 1/6/2013 - 5:45 pm
basis for tax purposes. The amount of the loan repayment has no application
for taxes assuming you file the business on Schedule C. For your second
question, since you use the truck 100% in the business, you can take 100% of
the annual depreciation over 5 years. You can also depreciate the lawn
equipment over 5 years. Caution: if you claim depreciation on Schedule C, do
not deduct the lease payments from the LLC to you unless you also show the
lease payments as income on Schedule E.
At some point, you may want to transfer ownership of the truck and equipment
assets to the LLC to keep everything separated.
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