Need advice: Section 179 deduction for Truck

[Nathan Gesner]

I need to spend some money and cut down on taxes. CPA advises I purchase a vehicle so I'm curious about the advantages and I'm very short on time because it has to be done by December 31st.

I understand what type of vehicle qualifies. Let's assume my company purchases a qualified truck for $50,000 and puts it into service on December 31st. As I understand it, Section 179 allows a maximum deduction of $25,000 for this type of vehicle. However, I can also use bonus depreciation and effectively write off the entire purchase amount of $50,000. 

If we're in the 24% tax bracket, deducting the $50,000 would save me $11,000 in taxes which means I've essentially purchased the truck for $39,000.

Any advice? Am I missing anything? Would there be better benefits if I were to lease the vehicle or spread the standard depreciation over a period of five years?

Any recommendations on a Truck? I'm leaning towards the F-150.

[Michael Plaks]

@Nathan Gesner

Starting point: do you need a new truck now? Because if the answer is "not really" then it should be the end of the conversation.

If you do, then you also should know what kind of truck you need.

Assuming that you use your truck 100% for business (unlikely unless you drive another vehicle for personal needs) then yes, you can write off the entire truck now. 

Disadvantage 1: you will not be able to use mileage deduction in the future. You will have to track and deduct the actual expenses: gas, insurance, maintenance etc. If you drive a lot of miles, you will be sacrificing your future deductions.

Disadvantage 2: once you sell it or trade it in, the entire sales price or trade-in allowance will become taxable income, partially reversing your benefits of this year.