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McFarland_Lawn_Care
11-21-2008, 06:30 AM
Okay, so I do all of my own accounting except for tax filing. I've been taking more accounting college classes and have a quick question. It may be a little advanced for most businesses, but I was really curious how many of you depreciation your mowers and other equipment over the course of each year?? And if you do, how much do you accumulate depreciation each year?? Is there a landscapers book or chart that is published that has this information available?? Thanks in advance...

Jason

Fvstringpicker
11-21-2008, 01:50 PM
For tax purposes, normally take the section 179 write off if you plan to keep the mower. Other than that, you have to use the Modified Accelerated Cost Recovery System for tax purposes as promulgated by the IRS Typically, mowers carry a five year life (me thinks). You have a choice of 200% declining balance or straight line method. Either case you get a half year conversion, meaning you get a half year depreciation the 1st year and the last year regardless of when you buy it. Go to the link and download the publication

http://www.irs.gov/publications/p946/index.html

McFarland_Lawn_Care
11-21-2008, 02:01 PM
okay....thanks a lot. You seem to be quite knowledgeable on accounting. I was planning on just depreciating it by activities on the basis that my mower has an approximate life of 1,500 hrs and then depreciate it by the percentage of those hours I used per year. But straight line might be easier in the long run. It just seems really hard to estimate when I am just starting out. Oh well, even if I end up with gain or loss upon sale it's not the end of the world anyways. Haha...thanks again bud....good help!!:usflag:

Fvstringpicker
11-21-2008, 04:21 PM
I'm a CPA and accounting/taxation professor. Its hard to recommend exactly what your best approach is without knowing more detail about your business. Generally, the quicker you write off an asset the better, hence use section 179 and take the whole thing, or enough to zero you net profit, the first year. However, if your expecting substantial increases in profits in future years, you may want to spread the deduction over more than one year.

olde_blue
11-21-2008, 08:47 PM
I was planning on just depreciating it by activities on the basis that my mower has an approximate life of 1,500 hrs and then depreciate it by the percentage of those hours I used per year. But straight line might be easier in the long run.

Depreciating a mower based on hours may be useful for calculating the actual profitability of your business, but the IRS will not like it (also, don't forget the residual value at 1500 hours). Besides the straight line vs. accelerated depreciation, you need to know how long of a period over which to depreciate the mower. From my reading, the IRS requires you to depreciate a mower over 7 years (they have various asset categories). Unless you are just starting out, having an unprofitable year, or expect to be in a higher tax bracket in future years, I'd take the full 179 deduction.

McFarland_Lawn_Care
11-22-2008, 12:48 AM
Depreciating a mower based on hours may be useful for calculating the actual profitability of your business, but the IRS will not like it (also, don't forget the residual value at 1500 hours). Besides the straight line vs. accelerated depreciation, you need to know how long of a period over which to depreciate the mower. From my reading, the IRS requires you to depreciate a mower over 7 years (they have various asset categories). Unless you are just starting out, having an unprofitable year, or expect to be in a higher tax bracket in future years, I'd take the full 179 deduction.

Yes, I know I also have to figure in the "salvage value" of the mower at the end of it's useful life. But I think you are right - I am pretty sure my tax man ran my last mower through the 179 deduction. Thanks a lot to both of you. This is good knowledge that will really help me in the long run!! :clapping:

Roger
11-22-2008, 07:01 AM
Any equipment purchases have been taken off full-value the first year. I am always doubtful I will remain in business for the next year, so I take it when I can. My truck is different, but mowers, trimmers, etc, take full-value ASAP.

olde_blue
11-22-2008, 08:49 AM
Beware, though, if you fully depreciated your equipment, and you go out of business and sell the equipment (or convert it to personal use), you will have to pay taxes on money you get from the sale.

McFarland_Lawn_Care
11-22-2008, 09:59 AM
yes that's right. Actually the way I understand it - doesn't really matter if you go out of business or not, but if you sell it for more than you depreciated it, then you will have to report that amount as gain. Right??

olde_blue
11-23-2008, 07:32 PM
That's how I understand it. If you convert a mower to personal use (keep it after you go out of business to mow your own yard), I don't know exactly what procedure you follow.