Bought a bobcat for snow removal. Can I depreciate?

Tax, SDIRAs & Cost Segregation
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Bought a bobcat for snow removal. Can I depreciate?

Chris F.
CA · Member since 2019 · 77 posts · 16 votes

Title says it all. I got a bobcat with a deal. Can I depreciate it against the LLC holding the property or against the property itself?

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Ashish AcharyaBusiness Member
CPA, CFP®, PFS · FL · Member since 2017 · 5k+ posts · 3k+ votes
7y
Originally posted by @Chris F.:

Title says it all. I got a bobcat with a deal. Can I depreciate it against the LLC holding the property or against the property itself?

 Of course, you can. Might be able to take 100% depreciation the first year if not elected out. You can elect out if your loss is limited this year, need deprecation other years if you expect to be in the higher brackets, or need more income this year for certain credits. 

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  • Ashish AcharyaBusiness Member
    CPA, CFP®, PFS · FL · Member since 2017 · 5k+ posts · 3k+ votes
    7y
    Originally posted by @Chris F.:

    Title says it all. I got a bobcat with a deal. Can I depreciate it against the LLC holding the property or against the property itself?

     Of course, you can. Might be able to take 100% depreciation the first year if not elected out. You can elect out if your loss is limited this year, need deprecation other years if you expect to be in the higher brackets, or need more income this year for certain credits. 

    [email protected]941-914-7779
    INVESTOR FRIENDLY CPA®5241 Reviews
    WebsiteView Page
    TaxMD™ | AI-Powered Tax Planning
    WebsiteView Page
    2Reply
  • Chris F.
    OP
    CA · Member since 2019 · 77 posts · 16 votes
    7y
    Originally posted by @Ashish Acharya:
    Originally posted by @Chris F.:

    Title says it all. I got a bobcat with a deal. Can I depreciate it against the LLC holding the property or against the property itself?

     Of course, you can. Might be able to take 100% depreciation the first year if not elected out. You can elect out if your loss is limited this year, need deprecation other years if you expect to be in the higher brackets, or need more income this year for certain credits. 

    Apologies for my lack of understanding. What does elected out mean? I think I would want to depreciate it all year 1 so that I can get it over with. But is there benefit to doing it over a couple years instead?

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  • Ashish AcharyaBusiness Member
    CPA, CFP®, PFS · FL · Member since 2017 · 5k+ posts · 3k+ votes
    7y
    Originally posted by @Chris F.:
    Originally posted by @Ashish Acharya:
    Originally posted by @Chris F.:

    Title says it all. I got a bobcat with a deal. Can I depreciate it against the LLC holding the property or against the property itself?

     Of course, you can. Might be able to take 100% depreciation the first year if not elected out. You can elect out if your loss is limited this year, need deprecation other years if you expect to be in the higher brackets, or need more income this year for certain credits. 

    Apologies for my lack of understanding. What does elected out mean? I think I would want to depreciate it all year 1 so that I can get it over with. But is there benefit to doing it over a couple years instead?

     Yes, sometimes. Depends on your individual situation. That’s is why you have your professional look at your number. 

    If qualified for 100% depreciation is mandatory unless elected out. 

    [email protected]941-914-7779
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    1Reply
  • Eamonn McElroy
    Accountant · Atlanta, GA · Member since 2015 · 1k+ posts · 1k+ votes
    7y

    Ordinary and necessary are the key words...

    If it passes that smell test, then we have to examine personal vs business use.

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  • Chris F.
    OP
    CA · Member since 2019 · 77 posts · 16 votes
    7y
    Originally posted by @Eamonn McElroy:

    Ordinary and necessary are the key words...

    If it passes that smell test, then we have to examine personal vs business use.

     Awesome. Its used exclusively to remove snow for the property.

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  • Brian BoydPro Member
    USA · Member since 2019 · 305 posts · 536 votes
    7y

    @Chris Fi Yes. Section 179 of the tax code allows for this. In fact the new tax cuts and jobs act allows 100% depreciation on machinery and equipment in the first year if the life of the asset is less than 20 years.

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  • Paul HoffertPro Member
    Investor · Jacksonville, FL · Member since 2011 · 7 posts · 9 votes
    7y

    Hello Chris,

    This is just a thought but since you were gifted a piece of equipment are you considering putting it on the balance sheet under the holding llc and using it to clear other properties around your property. Another source of revenue under the llc. Upon a future sale of the property you could continue the services under the llc to the new property owner as well as the other customers or sell it together with the property showing another avenue of revenue.  I know with my warehouses up north we contract out snow removal. If so you may consider a longer depreciation, depending on how long you want to hold the property. It is just a thought. I don't know your situation and I am not trying to provide tax advice. 

    I am also going under the assumption that you are running the expenses (fuel, maintenance, insurance and ect for the unit) in the holding llc. No matter what always get your local CPA to review, they are invaluable in their guidance on these matters. 

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  • Chris F.
    OP
    CA · Member since 2019 · 77 posts · 16 votes
    7y
    Originally posted by @Paul Hoffert:

    Hello Chris,

    This is just a thought but since you were gifted a piece of equipment are you considering putting it on the balance sheet under the holding llc and using it to clear other properties around your property. Another source of revenue under the llc. Upon a future sale of the property you could continue the services under the llc to the new property owner as well as the other customers or sell it together with the property showing another avenue of revenue.  I know with my warehouses up north we contract out snow removal. If so you may consider a longer depreciation, depending on how long you want to hold the property. It is just a thought. I don't know your situation and I am not trying to provide tax advice. 

    I am also going under the assumption that you are running the expenses (fuel, maintenance, insurance and ect for the unit) in the holding llc. No matter what always get your local CPA to review, they are invaluable in their guidance on these matters. 

     it's actually a purchase separate of the escrow but I would keep it under the llc yes. 

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