Overdrive

February 2018

Overdrive Magazine | Trucking Business News & Owner Operator Info

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BUSINESS 24 | Overdrive | February 2018 BY JAMES JAILLET Under the tax overhaul enacted in late December, owner-operators will be able to claim bonus depreciation on pur- chases of used trucks and trailers. Prior tax law allowed bonus depreciation only for new equipment purchases. This equipment-buying incentive included in the Tax Cuts and Jobs Act, signed into law by President Trump on Dec. 22, allows owner-op- erators to deduct 100 percent of truck and trailer purchases until the end of 2022. Starting in 2023, the bonus depreciation deduction dwin- dles 20 percent a year until 2026. It is eliminated starting in 2027. However, truck and trailer buyers will be able to take the bonus depre- ciation deduction only in the year the equipment was purchased, rather than phasing depreciation deductions over multiyear periods, say experts at owner-operator business services firm ATBS. "The single biggest change is you had the option in the past of choos- ing your depreciation — you could depreciate a truck over three years, or you could do all at once," says Todd Amen, ATBS president and chief executive officer. "The way we read this new law, it says you have to expense the assets you bought in the year you bought them." Should equipment expenses exceed operators' income for the year, which is likely, the bonus depreciation deduction cuts owner-operators' income to zero and allows them to carry that loss forward into the next year, which could help lower their tax bill for that year. When the bonus depreciation rate begins to fall in 2023, owner-oper- ators likely will return to using the standard Section 179 deduction, which allows them to deduct up to a million dollars a year in equipment purchases from their yearly profit. The tax reform law also eliminates the like-kind exchange deferment for capital gains taxes relative to equip- ment purchases. In the past, an oper- ator selling a used truck for $50,000 that had been depreciated to zero could defer capital gains tax on the $50,000 by buying another truck. If it cost $150,000, the deferred capital gains would lower its starting value for depreciation to $100,000. However, "the new rules for bonus depreciation and the immediate expensing of capital assets should eliminate the negative impact that may result from" the removal of the capital gains deferment, notes ATBS in a memo to clients. Bonus deprec iation expands to used trucks While used truck purchases now score tax benefits for owner-operators, the bill has even greater implications for small-business truckers that could cut their tax bill by thou- sands of dollars. See Overdrive Editor Max Heine's column on page 5 for details. If you put an adolescent child on the payroll and pay him or her, say, $4,000 for the year, they pay no taxes on the income because they didn't make enough. And you pay no tax on it, either, as a business expense. Make sure the kids are doing age-appropriate work, and keep documentation of it, including filing a W-2 form just as you would do with an adult employee. The Partners in Business program is pro- duced by Overdrive and the consultants at business services firm ATBS. It is spon- sored by Ryder and Truckstop.com. Free Partners in Business seminars will be held at the Great American Trucking Show in Dallas, Aug. 23-25, 2018. Want more Partners in Business tips and information on how to run your small trucking business more profitably? Visit OverdriveOnline. com/pib-podcasts to find 20-minute podcasts on topics such as managing time, budgeting money and controlling fuel costs. PARTNERS IN BUSINESS TIP: HIRE THE KIDS Visit OverdriveOnline.com and search "taxes" to hear ATBS experts and owner-operator coach and satellite radio host Kevin Rutherford break down how the tax reform law will impact owner-operators. You also can hear the podcast – and subscribe to Overdrive Radio – on your preferred podcast client, including iTunes, Google Play Music, PocketCasts and Stitcher.

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