Depreciation of Tools
Hi everyone! I’m a first-year landscape business owner. When I bought the business, I based the purchase on its income value and transferred all assets to my new LLC while retaining the previous business name as my DBA. My first accountant mentioned that I could depreciate all the tools I acquired since they’re new to my ownership. However, my new accountant seems less certain about this. The same goes for the vehicles; while some of the trucks are older, they are still new for my business.
Does anyone have insights on this?
One response
It sounds like you’re navigating an important aspect of Accounting for your new landscape business. Depreciation can be a bit complex, especially when transitioning from an existing business to your new LLC.
Asset Acquisition: Generally, when you acquire assets (like tools and vehicles) under a new business entity, you may have the right to depreciate those assets for tax purposes. However, the method and eligibility can depend on several factors, including how they were valued and the structure under which you acquired them.
New Use vs. Asset Age: Your new accountant’s perspective might be based on the idea that depreciation depends on the use or the economic lifespan of the assets rather than just ownership. Even if the tools and vehicles are “new” to you, their depreciation schedule may be influenced by their original purchase dates and remaining useful life.
Current Tax Laws: The specifics can also depend on current tax laws, such as Section 179 deductions or bonus depreciation, which allow for more immediate write-offs of asset costs.
Consulting Professionals: Because Accounting regulations can be complex, and individual circumstances vary widely, it’s usually best to get a clear answer directly related to your situation. Consider discussing this topic further with your accountant to understand their reasoning, or even seek a third opinion from a tax professional who specializes in small business Accounting.
Documentation: Make sure to keep thorough documentation of all asset acquisitions, as this will help substantiate your claims for depreciation should you ever be audited.
Ultimately, seeking further clarification and understanding the rationale behind the different opinions can help you navigate this effectively. Good luck with your business!