How to Calculate Original Asset Cost from Previous Years' Depreciation on My Food Truck?

Wait, I'm confused. Wouldn't the second year depreciation be higher than the first year? The numbers they gave show the second year ($15,128) is higher than the first year ($7,564). Is that normal? I thought depreciation amounts were supposed to decrease each year?

Great observation about the pattern. You're thinking of straight-line depreciation where the amount stays the same each year. The MACRS method (Modified Accelerated Cost Recovery System) that many businesses use actually has different percentages for each year, with Year 2 typically being higher than Year 1. This happens because MACRS uses something called the "half-year convention" which assumes you purchased the asset in the middle of the first year, so you only get half a year's depreciation in Year 1. Then Year 2 gives you a full year's worth at the accelerated rate, making it the highest depreciation year in the schedule.

Did you have to upload your previous tax returns for this to work? I'm always nervous about uploading financial documents to websites I haven't used before.

How accurate was it? I've tried calculator websites before and they're usually overly simplified and don't account for mid-quarter conventions or other adjustments that might apply to business assets.

You do upload your returns, but they use bank-level encryption and delete your docs after processing. I was hesitant at first too, but their privacy policy was really clear and I researched them before using it. Their calculations were spot on - they even detected that I had placed my food truck in service in the fourth quarter of the year, which triggered the mid-quarter convention instead of the half-year convention. My accountant verified everything and was impressed with the detailed depreciation schedule they provided for all future years.

Wait, there's a service that waits on hold with the IRS for you? That sounds too good to be true. Does it actually work? Last time I called I was on hold for over 3 hours and eventually had to hang up.

I'm skeptical. Why would the IRS help with calculations like this? Don't they just tell you to talk to a tax professional? And how much does this service cost? Sounds like it could be expensive.

Yes, it absolutely works! They use technology that holds your place in the IRS queue while you go about your day. When the IRS agent answers, the service calls your phone and connects you immediately. No more waiting on hold or listening to that terrible music! The IRS actually has technical assistance representatives who can help with these kinds of calculations. It's part of their taxpayer assistance services. They won't do your taxes for you, but they can clarify how certain calculations should be done according to their rules. I was surprised too, but the agent I spoke with was really knowledgeable about depreciation methods and helped me figure out my original asset cost.

That's a really good suggestion, thank you! I actually took out a loan for part of it, so I could probably find the loan documents too. I was just hoping to figure it out from the depreciation numbers since I had those handy. Would the calculation that Profile 12 provided make sense to you? The amounts don't quite match up with what I recorded, so I'm wondering if I used a different method than standard MACRS.

I think Profile 12's calculation is on the right track, but it seems like you might be using the 200% declining balance method rather than the standard MACRS percentages they provided. This would explain why your second year depreciation is higher than what their calculation suggests. Try this: if your original cost was around $39,500-$40,000, then a 5-year 200% declining balance method with half-year convention would give about $7,900 in year 1 and $15,100 in year 2. That's really close to your numbers of $7,564 and $15,128. For year 3, you'd be looking at about $7,600 depreciation. If these numbers sound right, I'd go with an original cost of $39,800, which would give you pretty much exactly what you reported for the first two years.

Great idea! I've been a dealer for food trucks for 10+ years and we keep ALL sales records. We get calls like this regularly and can provide copies of the original invoice. Most dealers should be able to do this for you.

I hadn't even thought of that! I bought it used from another food truck owner who was going out of business, so I don't have a dealer to call. But I just remembered I might have the original bill of sale somewhere in my home office. Going to dig through some files tonight. I did some calculations based on what everyone suggested here, and I'm pretty confident the original cost was around $39,800. That gives depreciation amounts that almost exactly match what I claimed in 2022 and 2023. This year's should be around $7,600. Thanks everyone for your help - I was really stuck on this!