Hi Frank I hate having payments! We have been working hard at paying of our 2005 Freightliner. We have it set to pay off in about 2 1/2 years at the most. We are also working on trying to be able to pay cash for out next truck. I have been weighing the difference between paying the interest for 3 years and getting a tax break for that amount of time, or just paying for the truck out right. Which way would have better off in 3 years having the deduction or not having interest for 3 years?
Thanks for your help
Bob & Linda Caffee
O/O D6077 FedEx CC
Bob & Linda,
Paying off the turck in a shorter amount of time is fine, the depreciation would be the same over the 3 years allowed. and you would lose the interest deduction. Remember the interest is higher in the first years of the financing, just like a Mortgage payment on you House. The first 15 years is basically all interest, and then the principal gets paid off faster. and your interest is null. You have to remember that a Vehicle Loan is a Simple Interest loan and compounds on a Daily basis from the due date. Where the rule of 78's is taken. I really cannot explain it to you in detail, I am not a vehicle dealer. and it could be a large deduction for you if you financed it.over three year period depending on the month it was put in service. its life is 4 taxable years depending on the month
example
purchased in July 05 you get 6 months depreciation for 05, 12 months for o6, and 07, and 6 months for 08. You also have to recapture all the depreciation that is taken on the old vehicle which would bring your basis down in the new vehicle when traded in. there is a special formula for thatis to complicated to go into.
The only other thing that can be done if you do not finance the vehicle, would be to open a IRA for each of you.
and that is for I think either 3,000 or 4,000 each, but I am not sure about the amount you can use. I will check on that or call your bank and they can tell you
Frank
