Will the truck you buy in December be working by December 31?

A water damage restoration company in its first full year, about $850,000 of revenue and 14 people. The week before Christmas the owners wanted to buy a truck, maybe two, before December 31. The reason was the tax bill.

My answer was the same one I give every December. It makes no sense to spend $50,000 because you don’t want to spend $20,000.

A deduction lowers your tax by a fraction of what you spend. You still spent the rest. If you didn’t need the truck, paying the tax would have left you with more money.

Then the numbers. The truck they actually needed, a new chassis with a box on the back, was about $110,000. A four-year-old used one was about $40,000.

Then the date. The deduction does not depend on the day you buy the truck. It depends on the day you place it in service, meaning the day it is ready and available to do the job. A box truck that still needs to be built out is not in service. Buy it on December 28, have it ready on January 10, and the deduction is next year’s.

That is what happened here. They could buy before the new year, but they could not have the truck ready until the start of the year.

So the rule is simple. Buy the truck if the business needs the truck. Then the deduction is a bonus. Don’t buy a truck because you need a deduction.

What to do before year end:

1. Decide by mid December. Not the 30th.
2. Ask the dealer for the date the truck will actually be ready to work, with everything it needs on it.
3. If that date is after December 31, plan for the deduction next year.
4. Keep proof of the day it went to work. The first job ticket is fine.
5. Before you sign, ask your CPA what the purchase saves this year in dollars. Then compare it to the payment.

In QuickBooks Online, run the Balance Sheet as of today. Under fixed assets, find every vehicle you bought this year. Under liabilities, find its loan. A truck that isn’t on the balance sheet isn’t being depreciated at all, whatever day it went to work.

If you’re making a December decision like this, start the 5-minute intake.