Alas, food trucks have made their way into the Treasure Valley and surrounding areas. Vendors offer a variety of foods at reasonable prices with little wait time.
However, starting a food truck is an expensive endeavor. A typical food truck can cost $50,000 to $70,000. This includes the truck’s sale price, the cost to install appliances and safety equipment, and a host of other expenses.
For those wishing to share their recipes using the mobility and flexibility of a food truck, $50,000 to $70,000 is a lot of cash. However, the IRS may be able to help make the cost more bearable with the Internal Revenue Code Section 179 deduction, which reduces the amount of income on which you are taxed for the year you put your food truck into service.
Generally, property depreciates in value over time, and that depreciation is reported as a deduction on a business’ tax return every year for a certain number of years. Section 179, however, allows a business owner to deduct the full amount of depreciation related to business property for the year in which that property was put in service. This deduction is taken in lieu of smaller depreciation deductions over time.
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Thus, Section 179 allows a business owner to reduce its taxable income, which could result in lighter tax liability.
To qualify, the property in question must be tangible personal property purchased for and used in the business more than 50 percent of the time and put into service by Dec. 31. Also, the deduction will apply only to business income generated by the food truck.
Further, Section168(k) allows for bonus depreciation, which allows the business owner to deduct, in year one, one half of the property’s remaining basis after taking the Section 179 deduction.
There are a myriad of options when opening a business, and it is important to note that the limitations of this provision are complicated. Consult a qualified CPA or reputable tax attorney before fully depreciating your business property under Section 179.
Vanessa Mooney is a student intern at the University of Idaho’s Low Income Tax Clinic. firstname.lastname@example.org.