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Old 12-07-2018, 08:00 PM   #1
Simplyjames
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Buy a new truck?

Year is ending in five minutes and I ended up just working for cash all year. Oops. Wasnít my plan, but I just got caught up in the busyness of constant indecision.
Anyone ever find themselves here?
This accountant I just talked to yesterday is recommending buying a truck quickly.
Does this make sense? I probably owe around 12,000 plus late fees and such.
How much will a truck purchase help me?


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Old 12-07-2018, 08:46 PM   #2
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Are you structured as a sole prop? LLC? S-Corp?

How do you take vehicle expenses? Via mileage rate? Or via actual expenses / depreciation?

I’m no accountant, but those issues - among others - would impact any decision.

Same caveat, but say your tax rate is 33%. So for every extra dollar you can write off, you save $0.33 in taxes. If you owe $12k roughly in taxes, wouldn’t you have to purchase a truck at least $36k to offset that? And that assumes you could write off the whole thing in one year. And do you even need a new truck or want the ongoing expenses?

My two cents, but spending money on non-necessities in order to save money can be a fools errand. If you’ve got the $$$ to buy truck outright, put it in a retirement plan instead, write that off, and have an appreciating asset over the long run.
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Old 12-07-2018, 08:53 PM   #3
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If anything, A sole proprietorship by default. Mr accountant man is setting me up as S Corp for January. Trucks are basically 40 G anyways and Iím sure I could use the truck, although I am perfectly content in a 5,000 vehicle too. I really donít care. A new vehicle with warranty and modern technologies would be nice though.


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Old 12-07-2018, 09:01 PM   #4
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Case 1: pay $12k taxes + no new truck = $12k total

Case 2: pay $40k for new truck + now no tax liability = $40k total. Assumes you can write off the whole thing now.

My ballpark numbers may be off, but if the general principle holds, I know which one is choose. Heck - drive your current truck into the ground, then buy a $15k used...you’ll still be better off.

I’ve toyed with idea of new truck compared to my paid off truck. But when I take the monthly payment I’d have, compare that to my average hourly profit, and calculate how many hours of work each month would just go to cover truck payment, insurance, etc? I’ll pretty much drive my truck til it dies.
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Old 12-07-2018, 09:03 PM   #5
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Nicely simplified. Thanks. Thinking time.


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Old 12-07-2018, 09:05 PM   #6
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Added fact though: I currently have no truck. I can grab a five thousand dollar truck or a new one with warranty.


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Old 12-08-2018, 05:45 AM   #7
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I have bought a new truck once in my life. And I know a lot of people like new and shiny hell I do to but I sold that thing for about 10% of what I bought it for. Better than scrap price but still it was a terrible investment. The 5 trucks I have now I paid next to nothing for, all of them needed work but still no where near the price of new. If I added up all of them it wouldn't get me close to the 80k for the truck I want or that would be capable of doing what anyone of the trucks I have can tow/haul. If you were tired of working out of the Audi and wanted to buy a truck then you could buy the 5k truck and buy yourself a brand new enclosed trailer and you would be set. You wouldn't alleviate all your tax debt but you wouldn't be giving uncle trump 12k and you would have something to show for it. I don't know how the retirement fund that Lou mentioned works. I just buy stuff that I need or know I can make money with or upgrade the things I have now. My friend is in the same situation and he accountant pretty much told him the same thing. Do you need anything big more you spend the less you are giving the government. In his case he needs a skid loader and had been on the fence about spending the money to this point but now might be the best time for him to do it. He has been renting one more often and he is surpassing the monthly payment with nothing to show for it. So it all boils down to where you want to put your money and what you have to show for it at the end of the day
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Old 12-08-2018, 07:12 AM   #8
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The depreciation thing is a good kick it the butt. Older vehicles do seem a smarter buy. I bought a Jeep for 2,800, used it for two years and sold it for 3,200. All I threw on it was tires, shocks, plugs and fluids.
I also have purchased a new truck with six miles on it way back in 1997. Thatís was 22 G maybe? I used that until it died. I even had a little enclosed trailer with it.



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Old 12-08-2018, 04:58 PM   #9
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I did buy a used F150 last year and it qualified for a full depreciation. By taking that option I cant slowly depreciate it obviously. Certain trucks allow for that. I pull a trailer with it and will use it till it blows up or it makes sense to get a larger truck. (Probably never) I rather use the smallest truck possible and max it out from time to time then buy a nice big beefer and use 20% of its potential most the time.

I'm a trailer guy. Rather have open and enclosed trailer and pull weight then load anything on my truck.
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Old 12-08-2018, 05:31 PM   #10
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James - look into opening a solo 401k, traditional IRA, SEP IRA, etc and have your accountant run the numbers on contributing something to that versus buying a new truck.

Either option would help reduce your tax liability, although a truck purchase could probably offset most / all of it.

But while a retirement fund contribution can’t be financed like a truck (you need to have the cash on hand), it also doesn’t come with the immediate depreciation and expenses of a vehicle. And invested in low-cost index funds over the long term, there’s a very high chance of tax-free appreciation. One downside is once it’s contributed, the funds are generally considered untouchable until 59-1/2 unless you pay a penalty and taxes. But your accountant should be able to run hard numbers to give you hypothetical outcomes and pros / cons.
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Old 12-08-2018, 05:37 PM   #11
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he you can depreciate a new vehicle 25% in the first tax year, following tax year 20% of the balance etc etc, if you sell and get over what the depreciated book value is you pay tax on the profit.......im thinking about getting a new van early next year as the Toyota Hilux double cabs are a bit small in the back and i usually have to carry tools etc in the back seat, looking at 1 of these
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Old 12-08-2018, 05:43 PM   #12
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Jim - in the US, I believe there’s first year bonus appreciation available up to 100% of purchase price, based on gross vehicle weight rating and percentage of vehicle use allocated to business purposes.
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Old 12-08-2018, 05:47 PM   #13
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Yeah Lou when I started my SEP the guy told me I can contribute all the way up until April 15th and still use that for my taxes the previous year.
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Old 12-08-2018, 06:53 PM   #14
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Justin, I believe that applies only if you actually file your tax return on April 15th. If you file for an extension you can delay your SEP contribution until filing on October 15th, so long as you've paid your tax bill with your April 15th extension request. I did that for many years as I usually had a particular bit of income in the late summer each year that I used for my SEP contribution.
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Old 12-08-2018, 07:53 PM   #15
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That makes sense CX and also a very good idea.
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