What is the advantage of writing equipment off?

Discussion in 'Business Operations' started by grassman50, Sep 25, 2001.

  1. grassman50

    grassman50 Banned
    Messages: 36

    hi, i am new into the lawn mowing business. I was wondering what is the advantage of depreciation of equipment and writing off equipment. I guess i dont understand but hear people talking about it. Any help is greatly appreciated to the new member..... give it up to lawnsite.com!! thanks guys!!!:blob3:
  2. Runner

    Runner LawnSite Fanatic
    Messages: 13,497

    tax deductions. You'd be well off to ask a tax person about it. - even if you just go to H&R Block,or something. You may want to do a search in the business forum, also. That's PROBably where this thread is going to end up, I'd imagine, you'll get alot more suitable advice there. I hope this helps. Where abouts in Michigan are you?
  3. watatrp

    watatrp LawnSite Senior Member
    Messages: 511

    If you claim all the income that you earn, then that money is taxable. Any profit can be reduced by "writing off" equipment, repairs, etc. That reduces the amount of profit and the amount of taxes that you will owe. Of course if you don't claim any income then you probably won't want to claim any deductions. The IRS might want to talk to you! We're all honest here right?

    HOWARD JONES LawnSite Member
    Messages: 233

    A simplified example: You have $10,000 gross income. You have $6000 worth of equipment. You depreciate the 6000 over, say, over 6 years, meaning you take $1000 off the income each year for 6 years- pay taxes on 9,000 instead of 10,000. (You will also get to take off all expenses, such as gasoline for mowers, mileage, etc.)
  5. GrassMaster

    GrassMaster Senior Member
    Messages: 447


    When you buy equipment, it is not Money you pay yourself! It's Money you spend to make Money!

    You write it off & Lower your Taxes. Write off all you can & then some!

    Do you want to pay taxes on every dime you make or do you want to pay taxes only on what you pay yourself? There's a big Difference!
  6. grassman50

    grassman50 Banned
    Messages: 36

    so are you saying that if i have like a truck worth 15,000, mowers, trimmers, blowers, edger, areators, thatchers,fertilizer spreaders, trailers, all together, all togther worth about 25,000. so thats 40,000 worth of equipment. Now, im kinda different then anyone else, i love good equipment, so i have great equipment, but id say i will make around $15- $20 k per mowing season. How about would someone write off this equipment. Would i really be saving that much money from taxes? Cause if look at it this way, im really not paying myself much at all, all the money im making is going right back into the business. ??? Any suggestions would help guys. Thanks. :confused:
  7. thelawnguy

    thelawnguy LawnSite Silver Member
    Messages: 2,411

    Dont forget, if you write it off when you eventually sell it you must report the sale as income.
  8. watatrp

    watatrp LawnSite Senior Member
    Messages: 511

    Most of the time when you start out, a lot of the profit is put right back into the business. You have to check with the IRS. Different equipment is able to be depreciated at different rates. A truck would be depreciated over a number of years. Smaller items like trimmers, and mowers can be depreciated in the same year that you buy them up to a certain amount. I think that level was $19k last year. In theory, if you make 15k in one year and buy 15k of equipment in the same year, you made no profit and don't pay any taxes. If you take out loans you can only deduct the principal and interest payments that you make in that year.
  9. thelawnguy

    thelawnguy LawnSite Silver Member
    Messages: 2,411

    Basically the IRS doesnt care where you get the money. You dont report loans as income, and you dont report payments as expenses. You deduct only what you are able to re: purchases, and whatever interest you pay that year.

    In other words, if you borrowed 100k the end of December and only spent 10k by the 31st you cant deduct the whole 100k, only the 10k on the appropriate line item.
  10. watatrp

    watatrp LawnSite Senior Member
    Messages: 511

    Yes, you are correct. I was in error when I said you can only deduct the principal and interest on loans for equipment. If I take out a loan for a specific piece of equipment, I can deduct the entire cost of the equipment plus the interest paid on that loan for that year as long as the equipment falls under IRS guidelines for deductions.

    I think what you are talking about is a lump sum loan used at your discretion. In that case you can deduct only for equipment purchased. I usually take my loans out for specific pieces of equipment. Why borrow more than I need?

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