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Please_Be_Green
09-04-2008, 10:12 AM
Iím thinking about starting a small operation, an operation, which Iím hoping can break-even in year one and turn a Ďsmallí profit in year 2. Ultimately off-setting equipment purchases for my own long term use. ( i.e. Toro Z340)

This year, Iíve been intrigued in studying turf grasses, weeds, diseases and lawn maintenance in pursuit in up-keeping my home lawn. Iíve been reading everything I can get my eyes on over the internet and have even thought about attending a 3 week seminar through a university in Turf Care Management. All I can say is itís amazing how much there is to learn.

What also amazes me is that it seems as everyone on my block, but myself, has a lawn service cutting their lawn. Most of my new neighbors at some point this year have complained about a ďmissedĒ cut due to weather related issues. In the same breath made a comment how good my lawn looks. (Because Iím cutting every 3-5 daysí during the growing season and am not relying on someone elseís Ďscheduleí.)

SoÖ Iíve been thinking purchasing a Toro Z340 and getting a couple of accounts to off-set the costÖ Iíve mentioned it to 3 of my neighbors and they have all said that if I wanted to cut their lawns next year, theyíd be more than happy to pay me for lawn service. So I think I could potentially have 3 clients already and would be surprised if another 2 wouldnít quickly jump on board. So, I could potentially be cutting 6 properties including my own, 3 on one side, and 3 on the other side of the street. All 1/3 flat acre lots, minimal obstacles and approx 10ksq/ft of turf to cut and trim. Iíve watched their lawn services cut and finish in 15-20 or so minutes with their commercial grade ZTRís. (Granted 2 man teams with trimming happening simultaneously.) Currently it takes me 1 hour to cut and trim my own property with a 21" residential snapper.

Anyway, I guess my question really is about ďAccountingĒ of the business and depreciation of equipment.

Letís assume I have 5 clients, each paying $200/ month, 7 months a year, total $1400.00 per property. Grossing $7,000.00 which does get reported as additional small business income.

Letís also assume I purchase a Toro Z340 for $6,000.00

Assume Section 179 tax code doesnít change for 2009.

For my 2009 tax filing, after applying Section 179 depreciation of equipment, Iíd only have $1000.00 as taxable income and my ZTR would have been paid for.

I'm not missing anything, am I? Seems simple enough.

lawnpro724
09-04-2008, 01:20 PM
Is that the only thing your going to need to buy for your business?? Depreciate the mower over the next 3 yrs and your going to have other expenses besides the mower, what about gas, mileage, advertisement, insurance, and so on. Your calculations are not correct according to you your going to gross $7000 and write off $6000 and have a net of $1000 taxable income. Now what about the things I mentioned, remember your $7000.00 is a gross figure.

billslawn89
09-04-2008, 01:32 PM
thats why i use turbo tax home and business when i do my taxes! just plug in the numbers and turbo tax does it all for you. ya a big purchase like that you would want to write off over a period of time, not just the first year, unless of couse you made like 100,000 the first year.

bjack312
09-05-2008, 04:34 PM
Please_Be_Green,

You are correct that you can use the 179 deduction to take accelerated depreciation on your equipment, but you may not be able to take the full value of the purchase. The 179 deduction cannot exceed the net revenue on Schedule C for the year.

Example
Your gross revenue is $7,000
Expenses are $2,500 (gas, supplies, insurance, etc.)
Net revenue is $4,500 (Revenue - expenses)

You purchase your equipment for $6,000, but can only deduct $4,500 using section 179. The remaining $1,500 can be taken as depreciation in future periods.

Another issue to consider, once you have depreciated the equipment you will have a zero tax basis. If you decide to sell it, you will have to include the proceeds as income.

Hope this helps.

Please_Be_Green
09-05-2008, 04:46 PM
Please_Be_Green,

You are correct that you can use the 179 deduction to take accelerated depreciation on your equipment, but you may not be able to take the full value of the purchase. The 179 deduction cannot exceed the net revenue on Schedule C for the year.

Example
Your gross revenue is $7,000
Expenses are $2,500 (gas, supplies, insurance, etc.)
Net revenue is $4,500 (Revenue - expenses)

You purchase your equipment for $6,000, but can only deduct $4,500 using section 179. The remaining $1,500 can be taken as depreciation in future periods.

Another issue to consider, once you have depreciated the equipment you will have a zero tax basis. If you decide to sell it, you will have to include the proceeds as income.

Hope this helps.

Thanks... Thats what I was looking for.