In this post I simply wanted to quickly look at these changes. I am not a tax professional by any means and always recommend using one for your personal and business finance management.
Here’s what I learned about the new tax plan and how it may affect small trucking companies.
First of all, the amount available for first year depreciation cap has doubled to $1M from a previous $500K in 2017. This helps small trucking companies better plan for the future and their future equipment investments.
The nice thing is that you can carry this stuff over. So say you purchased a truck and trailer, got a driver going, incurred those expenses. $200K in equipment cost can now be taken against your taxable income. Whatever is left, if anything, can be carried over into next year.
The second year, the same truck you purchased a year prior still has some depreciated value which you carried over from the previous year. This is a whole lot easier to deal with than having to calculate half year terms and accounting for a three year depreciating asset over a period of four years.
By the third year, you again deduct the carried over amounts, if any. What’s nice about this year though is that should you have any profit left to report, it will “pass-though” your personal or corporate taxes at a rate of 20%. I believe this would be the small-business tax baseline which would likely save people money more often than not. As always consult with your tax professional.