Vehicle Maintenance Agreement

[Jiggers]

Taxpayer buys a new vehicle and pays $2,400 for a 6 year maintenance agreement.

Do you expense as vehicle expense in the year or purchase?

Or do you amortize over the 6 years as vehicle expense?

[BOB W]

Good question..... I've always included it in the purchase price and it just tagged along with what I did to the vehicle, 179, depreciate, or recaptue> whatever. Most maintenance agreements go with the vehicle and when sold it goes to the new owner.

I'll have to think about for awhile???????????????????????? I think I handled it correctly.

[dsi]

I've always treated it the same way as Bob, that is I add it to the cost of the vehicle and depreciate it accordingly.

[Kram BergGold]

6 year amortization

I always amortize it over the nubmer of years it is for. For sure you do not claim it as a current year car expense.

[erchess]

Hmmmmmmm

We can surely all agree that it is not a current year expense. Beyond that, I imagine that most professionals just roll it in with the rest of the expenses of the vehicle, and surely most of our clients don't even think to tell us about it as a separate expense. Now let me play devil's advocate for a moment.

We all know that insurance generally is written off in the year for which the coverage is provided rather than all in the year it is paid. For example, it''s not uncommon to pay for two or three years of insurance on your office at one time but when you do that you don't deduct the premium all in one year but instead amortize it over the life of the policy. So Kramberg may well be right as I have come to expect him or her to be. On the other hand, people often buy a vehicle and get special warranties against the under-body and the body rusting through. Would these receive different treatment from the overall vehicle warranty, and if so why? Also, can anyone produce a cite that is on point?

[ChEAr$]

insurance

pay office insurance three years in advance? Never. I may not even be in business
two years from now. (grin)

In a similar situation, one contrived just for this board, what IF you have an accounting
client (corporate) and for an extra fee guarantee "peace of mind" and that you will
represent them in case of audit in the future, which we can take as three years under normal circumstances.

When you are posting the books for that client next year, will you only deduct 1/3
of the cost of that portion of the fee?