New Business Taxes

[Matt Granger]

Like many people this year I decided to start my own small business as a side hustle and put my two year old cnc router to more use. I am trying to write this off is taxes and my accountant is asking to find a price for something similar/equivalent since I didn't purchase this brand new this year. I am having trouble finding this since most people aren't looking to sell a 2 year old router. Any advice on what people do to figure this. I appreciate it.

[Ken Fitzgerald]

Have you tried looking into any used CNCs that might be for sale to see how they are priced?

[Bruce King]

A two year old woodworking tool is worth about 70 percent of new and selling would net about 60 to 65 percent unless it was passed on to a low baller. You are not required to use the low ball price. I would think the accountant would know how to take the new price and depreciate it two years.

[Lisa Starr]

Like you've already seen above, you can give the accountant a number the represents 65-70% of new cost. That is a good estimate of value for most "large" equipment. We had to do this when we started my husband's business and move several of our personal tools into the business. For some items comps were available, but for others, virtually impossible to locate.

[Jim Becker]

AFAIK, your maximum write off for the machine will be what you paid for it. Do you not have an invoice or other evidence of what you paid for it? If you purchased it before setting up the corporation and your accountant works like mine, the cost to you is reflected as owner's investment accounting wise and then the cost comes out of the business through depreciation or direct write-off. Whether it's done in one shot or depreciated over five years will depend upon what's best for your business and what you qualify for. You're accountant is the one that has to determine that.

In my case, my CNC machine was purchased prior to incorporation. The cost was certainly easy and it was rolled into the business as an asset via owner's investment and it's on a 5 year schedule. I later purchased a used drum sander for $900. That was written off in one shot; not by Section 179 as there was a factor that didn't make it eligible for it, but via an alternative means for tax purposes.

If your accountant is stumbling on this stuff...well...maybe he/she isn't the right resource.

[Jim Koepke]

Don't forget, if you depreciate something and then sell it years later the government will want the depreciation back.

jtk

[Thomas McCurnin]

It may not be a direct write off. For those items with a life longer than a year or so, one has to depreciate it, not write it off. Check with your accountant.

[Matt Granger]

Thanks everyone for the input. I will get with my accountant. I have the invoice from when I originally purchased it and will go for the 70% of that. I might need a new accountant but we will see.

[Dave Mills]

Although I'm not an accountant, I would expect Section 179 would allow you a complete write-off in one year. Often that is financially better than depreciating over years. Check with your accountant...

[Jim Becker]

Although I'm not an accountant, I would expect Section 179 would allow you a complete write-off in one year. Often that is financially better than depreciating over years. Check with your accountant...
There are some qualification factors that come into play with Section 197 and small corporations. That sander I mentioned up above could not be taken via Section 179, but my accountant was able to use an alternative method to fully expense it for that particular tax year. It's complex stuff.