Truck depreciation and expenses

you should set up an asset account for the truck, all costs to make it ready for use get posted to that asset account, there are no repairs when making something ready for use, it is all cost of the item

when the truck is put into use you create  fixed asset account for the truck and do a journal entry

debit fixed asset truck, credit asset account for the full amount in that that asset account

the truck is subject to depreciation starting on the day it is put into use.

Thank you!  I just found out my client is going to take a section 179 deduction this year for all truck expenses.  How should I account for this in QBO?  Should I create a fixed asset account and depreciation account, and then do a JR at year end, or should I put all expenses in an expense account called 'truck supplies' or something like that?

yes the truck is a fixed asset, the 179 depreciation posts just as any annual depreciation entry

the result is a zero book value, but it stays on the books until sold or disposed of, there is scarp value if nothing else

expenses are not subject to section 179, only costs that are required to get the asset on hand and get it ready for use are item cost, and thus subject to section 179

Okay, great.  Thanks again!  I'm no tax expert, but doesn't my client's net income for the year need to be more than the section 179 deduction?  At this point in time, his next income does not even come close to what he has spent on the truck... so I am not sure who told him he can take a section 179 deduction for his truck.

This is not worded properly. Let's review:

"is going to take a section 179 deduction this year for all truck expenses."

Until it is Complete and Placed in service, you report Nothing.

And none of this is Expense. It is Building an Asset. Until all costs are accrued, you have not got Basis or a new fixed asset. You have accumulating Spending as an asset value.

Think of it like an actual building. These Expenditures are being Invested in the end result, so until it is In Service, it is accumulating Asset value that is not reported for purposes of Depreciation or Sec 179.

Now, let's look at this part:

"but doesn't my client's net income for the year need to be more than the section 179 deduction?  At this point in time, his next income does not even come close to what he has spent on the truck..."

Which is why a P&L alone is not enough info. You realize that the only reason he can Afford to invest in any new asset, is either because there is Net Income (P&L) or Owner Funds, or Lending to the business. The last two are Bal Sheet activity.

As to If you can take sec 179, assuming the vehicle is Done and in Use in 2018, is not the same as Should we take sec 179. You need to work with your own CPA that knows this business and can review everything with you. This issue is Tax Rule Guidance, not QB.

Hello Rustler.. Would it be ok if I ask you a question that is related to this and just to confirm I'm setting it up right? We purchased a truck and want to take Section 179 Deduction for the 2019 taxes. So I should set up the truck as a fixed asset account, set up the journal entry to debit the fixed asset truck and credit asset account for the full amount. Then I should do a journal entry to debit the depreciation expense (full amount) and credit the accumulated depreciation (full amount)? Just want to confirm that I am understanding it right. Thank you so much!

Hi there, Tylo1210.

The program doesn't automatically depreciate fixed assets. Instead, you'll have to manually track it using journal entries.

The calculation of asset depreciation is complex. With this, I'd recommend consulting your accountant to determine the appropriate depreciation account to create in QuickBooks. He can also guide you on how to properly record your assets and their depreciation. Additionally, please visit the IRS article to learn more about the instructions on how to depreciate properties.

Once confirmed, here are the steps to create a depreciation account:

1. Click the Gear icon and choose Chart of Accounts.
2. Click the New button.
3. Select Other Expenses from the Account Type drop-down list.
4. In the Detail Type drop-down arrow, choose Depreciation.
5. Enter the account a name. Ex. Asset depreciation.
6. Click the Save and close button.

After that, you can now create a journal entry to record the depreciation. Follow the steps below.

1. Select the  + New button and then choose Journal Entry.
2. On the first line, select the asset account you use to track the loan from the Account drop down arrow.  Then enter the depreciated amount in the Credits column.
3. From the second line, choose the Deprecation account you just created from Chart of Accounts. Enter the same depreciated amount in the Debits column.
4. Hit the Save button.

Please let me know if you have other questions.

If I purchase a truck for work for $60K for my business and it is 90% business use and 10% personal use, would my QB entry be $54K fixed asset and $6k shareholder distribution?