Quote:
Originally Posted by GMAN
I don't think most new owner operators need to worry much about paying a lot in taxes the first year. There will be a lot to write off. During the first year or two, I would be more concerned with making money. Avoiding or reducing your tax bite can come later. You can always buy a newer truck later, which could reduce your tax bite with depreciation. It takes a lot of pressure off to not have truck payments. There is some validity to your point about reducing taxes by paying interest. But you are still paying out the same dollars, just to the bank rather than the government. I would encourage those who can pay cash starting out, to do so. There are a number of other ways you can reduce your taxes other than accumulating debt and financing your purchases. You can set up a 401k, IRA, buy real estate, and other investments which offer the tax shelter, but accumulate in value. You will NEVER accumulate wealth by spending money. You accumulate wealth by keeping debt low and making your money work for you. People like Donald Trump have a lot of assets, but not so much net worth due high debt. At one time he was all but bankrupt because of high debt. He was put on an allowance and control of his business was essentially turned over to his debtors or bankers. He emerged from his difficulties to do well for himself. His money was primarily invested in real estate. It is a much different situation with trucking or most any type of capital equipment. If you have equipment financed (or anything else) it belongs to the bank until it is paid off. When you finance equipment you have something that depreciates quickly and doesn't accumulate much in retained value. When you have a lot of debt you are a slave to your creditors. You work to support your debt.
As i appriciate your input on everything trucking related as you know, ill have to respond to your post with another point of view.
You are correct when you say that you run a buisiness by keeping your debt low but i think, as well as you that trucking is not just another buisiness, its much more complicated than the rest as we rely on fuel and its price for example to run it ,which we all know is not something you want to rely on and that only keeps it kind of separated from everything else buisiness related. Fuel can hit 4.00 mark if situation with Iran escalates much further that it already is and what will you do with a 100,000K buisiness investment if you dont have any money in the bank as you paid cash for it.....with payments its someone elses money thats in risk, not my own. I rather pay interest to my bank than to IRS as i am at least getting something in return and building a releasionship with my lender for future investments if situation permits. Donald Trump survived because his money was not in play, even if he went out of the buisiness he would come out VERY wealthy as his money was safely chillin in bank while other people worried about his buisiness outcome and did everything possible to keep HIM afloat. With trucking its the same, if my engine blows up tommorow( god forbidd ) i feel much more secure with the large banking outfit standing in my corner to help me fight the Freightliner than if i was doing that on my own. You dont accumulate wealth by only spending money but to accumulate it you have to spend it, i am still debating on what to do with my truck as part of me dont want any debt at all and ill be able to pay mine off in August or so, but listening to buisinessmen tell me their expiriences i tend to turn my head the other way and lean towards the fact that you should not put your money out there on the risk line, let others people money do that as this buisiness is much more riskier that all buisiness out there, it may cost you some more down the road but, not really much, but the cost is worth it i think....
Friend of mine got killed last month on his tax returns as his truck has been paid off., and he also tells me that he will never pay it off the next time around, i think he is standing correct.
