Business vehicle depreciation write off?

Question

Guys, I’m new to owning a business and the tax rules that go with it. Formed an LLC in 2022. Haven’t done anything with it until last month. (I just bought a vacant lot that I’m getting ready to build a house on starting in Feb.) I need a work truck. Was going to wait until Jan so that I’m buying it in the same year that I’ll be making some business income but is that necessary?

Would there be any benefit to buying it this month before the year ends? Can I depreciate 80% this first year against mine and my wife’s w2 income? Dealers are doing all their year end sales right now which are making me reconsider waiting till Jan. If I can write off $40k of a $50k truck expense this year that would make me move up my timeline.

Thanks

Christian Block · Answer

It sounds like it's possible the business hasn't started yet, short of registering the LLC.  Identifying start dates is often a point of litigation between taxpayers and the IRS.  Generally, the start date is the point when the business begins functioning as a going concern and conducts business for which it was designed.  If you are building a house on the lot to start a residential rental real estate business, your business might not start until the house is placed in service.

Also, you want to be careful deducting auto expenses, and certainly want to keep a log to track your business mileage.

Sean Stack · Answer

It’s going to be 100% business. I have another vehicle for personal use.

Nate Meeker · Answer

@Sean Stack - It depends. What other business activity do you have going on in this LLC? How much will the truck be used in relation to the LLC activities versus personally?