Start business to buy tractor?

[k54frog]

Hi,
Am looking to buy small (~20hp) compact tractor w/ FEL & possibly BH, & misc implements.
Thought I could start up a small part time business doing surface work (ie: mowing, grading, moving, clearing, etc. but no BH for now due to liability concerns) and buy the tractor through the business. That way I could get the tax write-off and possibly make a few $$$ on the side. I expect to have about 3-4 hrs per week available and already have several people interested in my services if I decide to start up.
I am hoping this would allow me to purchase a nicer, new unit.
Any help from others who have done this or something similar?
I'm concerned about unseen pitfalls.
What is an appropriate rate to charge?
It'll be just me...no employees.
Thanks in advance.
-ken-

 

[Farmwithjunk]

Hi,
Am looking to buy small (~20hp) compact tractor w/ FEL & possibly BH, & misc implements.
Thought I could start up a small part time business doing surface work (ie: mowing, grading, moving, clearing, etc. but no BH for now due to liability concerns) and buy the tractor through the business. That way I could get the tax write-off and possibly make a few $$$ on the side. I expect to have about 3-4 hrs per week available and already have several people interested in my services if I decide to start up.
I am hoping this would allow me to purchase a nicer, new unit.
Any help from others who have done this or something similar?
I'm concerned about unseen pitfalls.
What is an appropriate rate to charge?
It'll be just me...no employees.
Thanks in advance.
-ken-

All that for 3 - 4 hours a week? Tax write-off is negligable at best. You have insurance liability (and associated premiums) Self employment tax, In Kentucky you're liable for workers comp even if you're sole proprieter and sole employee, and the list goes on.................Any percieved "gains" from tax write-off will be more than offset by added expenses.

If your sole purpose of "starting a business" is to get a big break on "out of pocket" cost on a tractor, forget that idea. You'll just be spending MORE money in the long run UNLESS you plan on doing more work than just 3 or 4 hours a week.

The topic of hourly rates gets thrashed around from time to time. At best, if you're in a higher cost of living area, expect maybe $100 an hour. More reasonably, expect something in the $50 to $60 range. In Kentucky rural areas (Where I live) , you'd be pressed to find anyone who'd pay more than $45 or $50 an hour. (For a 20 HP compact, I would expect considerably less than that) Figuring $100 an hour X 4 hours per week, you'd be lucky to make payments and cover expenses (fuel, ins. ect) The thought of going out and working to break even flies in the face of everything I believe in. You take a risk every time you fire up the tractor on someone elses property. You need more than "break even" to break even at that game.

If I'm just going to break even, I'll stay at home and watch Andy Griffith re-runs. Cheaper in the long run, and a lot funnier!

 

[k54frog]

Thanks Farm,
For me, as long as the cost is under 25K I should be able to purchase cash and expense it in the first year resulting in a 35% tax savings (my tax bracket). (ie: 18k tractor = 6k write-off). [unless I'm missing something in the IRS tax code under section 179 deductions/expenses]
As long as I work for an hourly fee, I am not subject to mandantory workmans comp in CA and won't need a contractors license. I still have to enquire about general liability insurance.
After the first tax year (2006) My expenses should be reasonably small.
I expect income to be ~6500/yr , annual service ~250, insur?<1000$? , fuel ~700, business license $90, (all expenses are also tax deductible at my 35% rate).
-ken-

 

[randy41]

note: a person in the 35% bracket has taxable income of over $336,550.

 

[Hard]

frog, if your tax bracket is indeed 35% and your taxable income is as high as randy41 indicates it must be to be in the 35% tax bracket why on earth would you be looking to work a few hours a week at $50 to $100 an hour???

 

[john_bud]

Some people just have to be busy and productive...

jb

 

[rback33]

Some people just have to be busy and productive...

jb

Please note this is a bad stereotypical comment, but I like knowing that a person in that income bracket is willing to get out and do some work and get dirrty.... I wish I had the time and money to do what he is doing...

 

[the_sandman_454]

Isn't there also an issue if you get caught using equipment purchased for the business with personal use? I seem to recall something about that with automobiles, using part of one's home as an office, etc when it gets written off.

 

[firemanpat2910]

not if you charge your self to do the work If you are in that tax racket oops I mean bracket, dont ask us get your cpa to figure out what you can claim, and how much risk there is in claiming the gray areas. oh and $117,792.50 buys alot of legal fees, incase the gov disagrees with your cpa.

 

[HomeBrew2]

note: a person in the 35% bracket has taxable income of over $336,550.

One never knows, but I quote my tax bracket including fed AND state ... we have a 9.3% top marginal here in Kalifornia ...