Accuset 2 upgrade, asset or expense?

[terrifictimbersllc]

Seeking opinion on whether the purchase of Accuset 2 upgrade for my 2001 mill should be regarded as a capital improvement (improve function, extend life of sawmill) or an expense (repair/maintenance, not improving function or extending life of sawmill).  For the books/IRS purposes.

[Magicman]

Calling all CPA's.  If I had that question, I would make a visit to my CPA.

Is your Accuset 1 broken/malfunctioning?  To me, that would be the determining factor.....but I'm not a CPA.

[red oaks lumber]

its a repair/expense. the upgrade only has a value increase in your eyes but not in apraised value. kind of like you overhaul a motor for 3 grand it doesnt make your truck worth3 grand more

[woodmills1]

IRS write offs

all new equipment I choose to either treat as a 179 expense or depreciate depending on how much depreciation I already have versus how much income

replacement parts I usually treat as repairs and take the direct write off

however an upgrade like acuset 1 replaced by acuset 2 could be treated as a depreciation.  Tax wise if you took it as a 179 expense it would be the same as taking it as a repair, but if you depreciate you get to have a smaller write off over more years.  As self employed you should also pay attention to how your social security is affected.

so i guess it depends what you want at tax time

my driveway improvements last year cost 10 grand, all able to be depreciated as an improvemnt to the business operation, but that kind of work has a 15 year depreciable life.  So 10/15  not much write off but it will be protecting income untill 2026.(1/2 first and last years so 15 is really 16)

I hate, but love doing my own taxes.  BTW  I am in the federal timber tax program

[Bibbyman]

Mary says,  you need to consult your tax preparer.   It depends on your situation.  You could go either way – one time expense or depreciation. 

Frankly,  I got tired of listening to her explanation.  (You got the short version.)

She said the best way would be to go buy a new mill with Accuset 2 already on it.

[zopi]

My mary (the tax preparer..) says it is a capital expense...and that you should consult your preparer about the 179 expense...

[OneWithWood]

Do consult with your CPA.  There are different ways to handle the purchase and your particular situation will help determine the best avenue to take. 

[flibob]

I would buy it put it on and call it a repair part.  If anybody said anything the accuset 1 broke. IMO

[woodmills1]

the tax thing is bigger than that for us smaller guys


you have to make predictictions about what you bought and when you are buying something else


If you gross over 40 grand and have no write offs then each dollar over 40 cost you 33 cents in taxes and 14.5 cents in social security


47.5 cents is DanG near half what you bring in


just cause we are small does't mean we don't get to pay attention

I talk to my taxman...............it's me