The Depreciation of Trucks: How Concrete Companies Can Minimize Their Tax Impact

contentbyroya
May 16
7 min read

As a concrete business owner, trucks are the backbone of your operations. However, these heavy-duty vehicles are also a significant cost investment. That’s why the IRS offers several tax incentives that allow you to depreciate these assets over time and reduce your taxable income.

Here, we’ll explore the key depreciation strategies available for these assets, provide practical examples, and touch on how to optimize tax planning.

What is Depreciation?

You’re probably familiar with depreciation, but to cover our bases:

Depreciation is a way to account for the fact that assets—like equipment, vehicles, or machinery—wear out or lose value as you use them. Instead of taking the full cost of the asset as an expense all at once, depreciation lets you spread that cost over the years it’s useful to you. This makes sense because the asset helps you earn money over time, so the expense should match up with that timeframe.

How Does the Depreciation of Trucks Impact Taxes?

For tax purposes, the IRS allows you to deduct a portion of the asset’s cost each year, which lowers your taxable income. This doesn’t mean you’re deducting the actual drop in market value—it’s a systematic way to allocate the original cost over the asset’s “useful life” (the years it’s expected to last). Say you buy a volumetric truck for $150,000, and the IRS says it’ll last 5 years. Instead of deducting the whole $150,000 the year you buy it, you might deduct $30,000 each year for 5 years (this is called straight-line depreciation, one of the simplest methods). It reduces your tax bill gradually over time rather than all at once.

Key Things to Know:

It’s Not Cash Leaving Your Pocket: Depreciation is a “non-cash expense.” You’re not spending $30,000 each year—you already paid for the truck upfront. It’s just an accounting and tax tool to reflect the asset’s decreasing value.
IRS Rules Apply: The IRS has specific schedules and methods (like straight-line or accelerated) to calculate how much you can deduct each year. It might not match the asset’s real-world value drop.

3 Depreciation Methods for Concrete Business Owners

The IRS provides three primary methods for depreciating trucks, each suited to different business needs:

MACRS (Modified Accelerated Cost Recovery System)

MACRS is the default method for truck depreciation. It spreads the cost over five years, but with bigger deductions early on. For instance, if you buy a truck for $100,000, you might deduct $20,000 the first year, $32,000 the second, and smaller amounts in later years until the full cost is covered. (Amounts vary, of course.)

Pro Tip: The IRS usually assumes you start using new equipment halfway through the year (the "half-year convention"), no matter when you actually bought it. But if you buy more than 40% of your equipment in the last quarter of the year, you might have to use the “mid-quarter convention rule,” which assumes you only used equipment for half the quarter. This results in a smaller depreciation deduction in the first year.

Section 179 Deduction

Section 179 allows you to deduct the full cost of the truck in the year you buy it, up to $1,220,000 in 2024 (as long as your total equipment purchases stay under $3,050,000). Heavy trucks like concrete pumpers or volumetric mixers usually qualify fully because they weigh over 14,000 pounds. This matters because the IRS has specific rules about which vehicles qualify for the full deduction based on their size and type. Heavier vehicles are less likely to double as personal cars, so the IRS allows more generous deductions to encourage businesses to invest in equipment that drives economic activity. When claiming Section 179 depreciation, you’ll use this form.

Pro Tip: You can still take Section 179 deductions even if you finance the truck. The deduction applies based on the full purchase price—not what you’ve paid so far.

Good to Know: Section 179 can’t be used to create or increase a net operating loss (NOL). If your business isn’t profitable this year, bonus depreciation may offer more value, since it can still be used even if you’re running at a loss.

Bonus Depreciation

With bonus depreciation, you can deduct 60% of the truck’s cost in the first year, then depreciate the remaining 40% over the next few years. For a $100,000 truck, that’s $60,000 deducted upfront, with the rest spread over five years, although that time frame can vary.

Good to Know: This method is actually being phased out and will be gone by 2027.

You can mix these methods if it makes sense for your business. For example, you might use Section 179 for part of the cost and bonus depreciation for the rest. The right choice depends on your business’s finances, so consulting a tax professional is your best move here.

A Real-World Example

Let’s consider a scenario where you purchase a new concrete pumping truck for $300,000 in 2024. Since your truck has a GVWR (Gross Vehicle Weight Rating) over 14,000 pounds and is used exclusively for business, it qualifies for the full Section 179 deduction. Here’s how you might apply these depreciation methods:

Option 1: Section 179 Deduction: You can deduct the entire $300,000 in 2024, provided your total equipment purchases for the year are below the $3,050,000 phase-out threshold and you have sufficient taxable income. This approach maximizes your immediate tax savings.
Option 2: Bonus Depreciation & MACRS: Alternatively, you could use bonus depreciation to deduct 60% of the truck’s cost ($180,000) in 2024. The remaining $120,000 would then be depreciated over five years under MACRS.
Option 3: Combining Methods: You could also combine Section 179 and bonus depreciation. For instance, you might take a partial Section 179 deduction of $100,000 and apply bonus depreciation to the remaining $200,000, deducting an additional 60% ($120,000) in 2024. The leftover $80,000 would then be depreciated over five years.
Good to know: Used trucks qualify for Section 179 and bonus depreciation as long as they’re new to your business.

A Note on Selling Used Trucks:

If you sell a truck after depreciating it, any amount you sell it for above its depreciated (book) value is considered ‘recaptured depreciation’ and is taxed as ordinary income—not capital gains. Keep this in mind when selling older trucks, as it can create a surprise tax bill.

Strategies to Minimize Your Tax Impact

To make the most of these depreciation methods, consider the following strategies:

Time Your Purchases: Depreciation deductions are based on when the truck is placed in service. By purchasing and using the truck before the end of the tax year, you can claim the deductions for that year. This can be especially beneficial if you expect higher income in the current year.

Choose the Right Method: If your business has high taxable income this year, using Section 179 to deduct the full cost of the truck may be ideal. However, if your income is lower, you might prefer bonus depreciation, as it can create a net operating loss that can be carried forward to offset future income. Keep in mind that Section 179 deductions are limited to your taxable income, but any excess can be carried over to future years.

Combine Depreciation Methods: You can mix Section 179, bonus depreciation, and MACRS to optimize your tax strategy. Use Section 179 for part of the cost to reduce current-year income, then apply bonus depreciation to the rest for additional upfront savings. Depreciate any remaining balance over five years with MACRS.

Consider State Tax Laws: While federal tax laws provide these incentives, state tax rules may differ. For example, some states do not conform to federal bonus depreciation rules, meaning you might need to adjust your depreciation schedule for state tax purposes. Be sure to consult with a tax professional familiar with your state’s regulations.

Keep Accurate Records: Proper documentation is crucial for claiming depreciation deductions and ensuring compliance in case of an audit. Track the purchase date, cost, and business use of each truck.

Deduct Maintenance and Operating Costs: Beyond depreciation, you can deduct truck-related expenses as business expenses, further reducing your taxable income.

What Qualifies:
- Maintenance: Repairs, oil changes, and parts (e.g., $5,000–$15,000/year for pump trucks).
- Fuel: Concrete trucks get 3–5 miles per gallon, so fuel costs add up.
- Insurance: $7,000–$10,000 annually for a 38m boom pump.
- Operator Salaries: $90,000–$100,000/year per operator.
- Tip: Use accounting software to categorize and track these expenses. If any company vehicle is used partly for personal purposes, deduct only the business-use portion (e.g., 80% of fuel costs if 80% business use).

Plan for Future Tax Changes: Tax laws evolve, like how bonus depreciation is being phased out (40% in 2025, 20% in 2026, phasing out by 2027 unless extended).

Tip: If you’re planning truck purchases, act in 2024 or 2025 to capture higher bonus depreciation rates. Section 179 limits may also change, so stay updated via a tax professional.
Example: Buy a $300,000 truck in 2024 to deduct 60% ($180,000) via bonus depreciation, rather than waiting until 2026 when only 20% ($60,000) would be deductible upfront.

By implementing these strategies, you can optimize your tax planning and reduce your overall tax liability.

Maximize Your Savings with Smart Planning

Depreciation is a powerful tool for concrete pumping and volumetric concrete business owners, allowing you to minimize your tax impact and reinvest in your operations. By understanding how to use MACRS, Section 179, and bonus depreciation effectively, you can make informed decisions that benefit your bottom line. However, tax planning requires careful consideration of your business’s unique financial situation, so it’s essential to work with a tax professional who can guide you through the process.

Additionally, leveraging technology like Tough Commerce’s platform can streamline your asset management, ensuring you have accurate records and real-time insights into your operations. With the right approach, you can turn your truck investments into significant tax savings while keeping your business running efficiently.

Consult with your tax advisor to determine the best depreciation strategy for your trucks, and explore how Tough Commerce can help you manage your assets and optimize your business operations.