STPS

Truck Depreciation for Owner-Operators

Let’s talk depreciation

What is depreciation? And what does it have to do with being an owner-operator?

Let’s answer that together. Depreciation is how you recover your truck’s cost as a tax deduction. Basically, if you bought even a used truck, and say it was $60,000, you want to be able to write that off at some point so that you can lower your tax bill.

Because you are using the truck through the years, you get to depreciate the asset, which means turning it into an expense over a number of years. Now, that’s the easy part of it, it gets harder when you get to the depreciation on your tax return versus depreciation on your books.

Calculating Truck Depreciation

Calculating depreciation for your tax return is different from calculating it for your bookkeeping. For bookkeeping purposes, you take the amount of the truck and divide it by 48 months.

For tax, they use a different schedule called double-declining balance. Just know that you get more money sooner, but the depreciation will be spread out over four years, even though it’s a three-year asset.

But one of the things you can do with a truck in the year that you purchase it is you can depreciate it more so than you would normally. So you can depreciate the entire value of the truck ($60,000) in the first year to lower your tax bill. This in theory sounds like a good idea, but this leaves you with three years that you are still making payments on the truck, and it’s no longer deductible.

We advise you to be careful when making decisions like this and to talk to your tax advisor to plan your deductions in order to minimize your tax bill.

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Written by Gentry DeWinter

Gentry graduated from Grand Valley with a Bachelor’s Degree in multi-media journalism. She is an artist who loves videography, and writing, and hopes to one day own multiple dogs.

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