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The situation is this: Upon separation we shared and paid off our debt. The debt was for our vehicles. His being twice as much as mine. He has his own business and despite his vehicle being paid for continues to be able to write off the depreciated vehicle costs on his taxes. Resulting in a deduction from his income of approx. 10 thousand. Would it be reasonable or allowable that he put that back on his income? He also makes alot of cash under the table that can't be proved so I can't get an imputed income on that. I know this will probably be a touchy subject.
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Just because the vehicle is paid off, does not mean the vehicle does not depreciate. Depreciation is a perfectly valid and legal tax deduction. IMO, you would be fighting a losing battle if you tried to challenge this. -
Sucks sooooo much
I know... I'm signing the agreement as soon as the i's are dotted and t's crossed. No matter what it's a loosing battle when a business in involved in a separation unless it's worth over a mil.Comment
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10K sounds like a lot of depreciation - that must be some fancy vehicle!
I think he can do straight-line depreciation i.e. claim the same amount each year, but that means the vehicle would have to be worth $100,000 when bought! (assuming depreciated to $0 over 10 years).Comment
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Another typical method is to claim a depreciation of 30% of the vehicle each year. So if the vehicle was bought for $40k, the first year you claim $12k depreciation. The second year you claim (40-12)*30%=$8.6k. You can keep doing this until the vehicle is sold at which point the amount sold for is a gain. So his claim of $10k is reasonable as long as he claims the value the car is sold for eventually.Comment
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Yes, however since the vehicle is paid off, I'm guessing that it is at least 3 or 4 years old.
- After 4 years, using a fixed 30% rate would also require the vehicle to cost $100,000 initially to warrant $10k depreciation.
- After 3 years .... $70,000 ...Comment
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The maximum allowable cost of a vehicle for business purposes is $30,000 plus hst ($33,900.00). The allowable method for depreciation for tax purposes is 30% per year declining balance.
So, the first year is 33,900 x 30% x = 10,170.00
the second year you can deduct 33,900 - 10,175 = 23.725 x 30 % = 7.117.50
the third year you can deduct 23,725 - 7,117 = 16.608 x 30% = 4,983
The only other thing I can think is that his TOTAL auto expenses are 10K - which is very reasonable - but depreciation of 10K - nopeComment
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