After your truck is paid off....

[Graymist]

To my understanding, till your truck is paid off, you can claim your monthly truck payments as an expense on your tax returns, and to that extent your tax burden is decreased. But what happens after your truck is paid off, and you can no longer claim your truck payments as an expense ? Do you end up paying more taxes ? Would it, in that case, make more sense to buy a new truck to claim the tax deduction on truck payments, and not pay higher taxes ?

Basically, at the end of the day, which of these scenarios would leave you with a higher take-home, everything else being equal ?

[BanditsCousin]

You can also write off your interest on it as well. I know a few o/o's that buy new trucks every 2 years for the tax advantage. A good, paid-for truck isn't a bad way either. However, if you buy new trucks, you'll always have new equipment. Statistically, I'm sure new trucks break down a LOT less, but you still can have probelm child trucks that come off the assembly line.

The other option is start adding chicken lights and chrome when the truck not is paid to alleviate your tax burden.

[LostSoul]

Basically, at the end of the day, which of these scenarios would leave you with a higher take-home, everything else being equal ?

I think you would have to run some different tax scenarios based on your actual current tax situation to determine what is best for you. For example, if you are making $24K a year in pasyments and you don't save $24K a year in taxes, was it worth it. You have to compare taxes with and without the payment while still considering your other expenses. Fuel for example will be needed regardless of the truck. More maintenance may be required on the older truck.

You have to determine how it works out for you. If you have turbo tax you could run some different scnarios to help decide.

[GMAN]

Don't worry too much about paying taxes after your truck is paid off. There is always something that needs to be repaired or replaced.

[mike3fan]

For me I didn't like having a paid off truck. I paid more in taxes and was always fixing something on a 1.3 million mile truck. I decided that it was a wash and if I was still paying in about the same I might as well have a newer truck and payments rather than have breakdowns and miss work.

[Rev.Vassago]

To my understanding, till your truck is paid off, you can claim your monthly truck payments as an expense on your tax returns, and to that extent your tax burden is decreased.

Yes and no. You can only deduct the actual truck payments if you are leasing the truck. If you purchase the truck, then you depreciate it over three years. There are several ways you can depreciate it; evenly over the three years, higher at the beginning, and less at the end, or vice versa. Once the truck is depreciated, you can only deduct the interest paid on the loan. So if you have a 5 year truck loan, you get the deduction for the first three years, after which you end up with a higher tax bill.

[allan5oh]

Get this in your head:

There are ZERO advantages to writeoffs.

Say for example you "received" $100,000 in income this year. Would you:

1) Keep it and pay ~30% tax, and end up with ~$70k

2) Blow it all on something tax deductible, pay no tax, but end up with no money

It is ALWAYS better having a truck paid off and fully depreciated. At this point, more money is made so more taxes are paid. But in our tax system(bracket system) your tax burden goes up somewhat linearly. In other words it's always a percentage of your income.

I've never understood this "but you need some sort of writeoffs". I'd rather have zero writeoffs and keep all my money, minus a percentage that goes to income tax of course.

[Heavy Duty]

Get this in your head:

There are ZERO advantages to writeoffs.

Say for example you "received" $100,000 in income this year. Would you:

1) Keep it and pay ~30% tax, and end up with ~$70k

2) Blow it all on something tax deductible, pay no tax, but end up with no money

It is ALWAYS better having a truck paid off and fully depreciated. At this point, more money is made so more taxes are paid. But in our tax system(bracket system) your tax burden goes up somewhat linearly. In other words it's always a percentage of your income.

I've never understood this "but you need some sort of writeoffs". I'd rather have zero writeoffs and keep all my money, minus a percentage that goes to income tax of course.

He is right, also lower insurance if you carry comp, plus when you aren't running you don't have payments that keep running.

[dobry4u]

Actually depreciation is a paper write off so I think it is a better tax advantage to pay off the truck and have the depreciation expense. Not to say it is worth buying a new truck every three years.

[BanditsCousin]

Partially true. When your net income is reaching a break point where tax brackets end/meet, sometimes that chrome visor you can buy that puts you into a LOWER tax bracket is very beneficial. Pretty much what I'm saying is, there are points where you can buy something for you/your truck or pay it to the government.

An example-

Lets say you net 80, and pay 30%. After 24 in tax, you are left with 56.

Lets say you bought those naked lady mudflaps and your net is now 79, but taxed at 27% (assuming <80 grand )and you are left with just over 57,500. You got extra chorme/gadgets, and STILL have more money.

Now, these are rounded numbers, and only examples of tax brackets, but it's pretty easy to see what I'm getting at.

And I believe the term is "exponential" as opposed to linear since the tax rate increases with taxable earnings.

[Brown67]

Partially true. When your net income is reaching a break point where tax brackets end/meet, sometimes that chrome visor you can buy that puts you into a LOWER tax bracket is very beneficial. Pretty much what I'm saying is, there are points where you can buy something for you/your truck or pay it to the government.

An example-

Lets say you net 80, and pay 30%. After 24 in tax, you are left with 56.

Lets say you bought those naked lady mudflaps and your net is now 79, but taxed at 27% (assuming <80 grand )and you are left with just over 57,500. You got extra chorme/gadgets, and STILL have more money.

Now, these are rounded numbers, and only examples of tax brackets, but it's pretty easy to see what I'm getting at.

And I believe the term is "exponential" as opposed to linear since the tax rate increases with taxable earnings.

Doesn't work that way. Not sure where the tax brackets break, but let's say 80k. The first $79,999 is taxed at say 27%. At 80K it jumps to 30%. The first $79,999 is still taxed at 27%. Every dollar over that is taxed 30%. Not the full amout.

[Rev.Vassago]

Doesn't work that way. Not sure where the tax brackets break, but let's say 80k. The first $79,999 is taxed at say 27%. At 80K it jumps to 30%. The first $79,999 is still taxed at 27%. Every dollar over that is taxed 30%. Not the full amout.

You would think someone who claims to earn over $300,000 a year would understand how they are taxed on it.

[Creek Jackson]

You would think someone who claims to earn over $300,000 a year would understand how they are taxed on it.

The Rev never forgets!!

[allan5oh]

The Bandit brings up a good point, just an incorrect one.

I think his logic is where a lot of business owners think that a tax deduction is the magic ticket.

[BanditsCousin]

What I should have specified, is that the more you're making, the more you're taxed on, the more you're taxed. Almost like working for free, even though you're not. The more dollars you earn v.s. take home starts declining.

But, hey, I never ran an entire month averaging 78cpm like some people, so what would I know?

[Rev.Vassago]

But, hey, I never ran an entire month averaging 78cpm like some people, so what would I know?

And we all know who's fault that is too.

(plus, since I was never paid for the work I did, technically I ran an entire month for $0.00 per mile.)

[Les2]

Ever think about paying the truck off and taking it easy? Thats what I did! The only problem, and anyone who has paid off almost everything they have is, you have no credit! No credit is worse than bad credit. Yeah I know it sounds stupid but its true to a point.

[solo379]

but its true to a point.

Not at all. If you have no current debts, doesn't mean you don't have a credit history. I'm debt free, scoring over 800....

[Heavy Duty]

Partially true. When your net income is reaching a break point where tax brackets end/meet, sometimes that chrome visor you can buy that puts you into a LOWER tax bracket is very beneficial. Pretty much what I'm saying is, there are points where you can buy something for you/your truck or pay it to the government.

An example-

Lets say you net 80, and pay 30%. After 24 in tax, you are left with 56.

Lets say you bought those naked lady mudflaps and your net is now 79, but taxed at 27% (assuming <80 grand )and you are left with just over 57,500. You got extra chorme/gadgets, and STILL have more money.

Now, these are rounded numbers, and only examples of tax brackets, but it's pretty easy to see what I'm getting at.

And I believe the term is "exponential" as opposed to linear since the tax rate increases with taxable earnings.

Why not put you money in a IRA, lower your taxes and keep your money, and you don't have to polish it.

[heavyhaulerss]

I've never understood this "but you need some sort of writeoffs". I'd rather have zero writeoffs and keep all my money, minus a percentage that goes to income tax of course.
__________________
No Payne, No Gain!


Ditto.. I have heard this over the years. As told to me many times, that I need to get rid of my paid for truck, to have a payment , to have a write off. first I was told I was wrong for buying an inexpensive truck & one that does not hold it's value. I didn't care about it's resale value. I was planning on driving every penny I spent on it, out of it. I never wanted to put money into something that depreciates. so every year rather than put money into a newer truck or new chrome, I would buy property. something that appreciates & also has a write off.

If you do the tax write off every couple-few years, you may never get out of that cycle of owing. it's a freedom thing with me. PEACE OF MIND! some folks accept as fact that they will always have bills & payments & a truck payment is one of them. not me. financial freedom is eliminating anything that has a payoff date. utility bills, other taxes we have to pay as long as were alive. but weather it be mortgage, or anything else, if it has a "payoff" then I want to PAY IT OFF!.. a.s.a.p.