When you prepare your annual income tax return, you can claim deductions for certain expenses. As a general rule, the Internal Revenue Service allows a deduction for unreimbursed expenses associated with business activity. If you need a vehicle to generate taxable income, for example, then you can deduct the expense of that vehicle. This applies to passenger cars, motorcycles, delivery trucks -- anything with wheels, including trailers.
If you use a trailer for your job or your own business, you can deduct the cost as long as it is paid by you instead of your company or another party. These deductions include the purchase price, sales taxes, repairs, maintenance, and any license or registration fees you have to pay. The IRS rules state that the expense must be "ordinary" and "necessary" for someone working in the particular business for which the trailer is used. This means that a painter can deduct a trailer that is ordinarily used to haul supplies, but a real-estate salesperson might have a more difficult time claiming a deduction for the same item.
Business vs. Personal Use
If you also use the trailer for personal needs, you must apportion the business and personal use. For example, if you use a trailer half the time for vacations and half the time for business, you can only deduct half of your trailer expenses. The IRS will not allow you to use the mileage deduction for trailers. This is only available for cars, trucks and other self-propelled vehicles.
If you need to use a trailer to perform the functions of your job, and your employer does not reimburse you for this cost, then you can deduct the expense as a miscellaneous unreimbursed employee expense. If you need to rent a trailer to get equipment to a job site, for example, you can deduct the cost. You can also deduct the unreimbursed cost of expenses such as tolls and parking fees. Unreimbursed employee expenses are deducted on Schedule A and are not considered a "business expense" that you can claim on Schedule C.
For sole proprietorship business use, taxpayers deduct their expenses on Schedule C, which calculates taxable business income. Line 20 is for rent or lease payments; line 21 for repairs and maintenance; and line 22 for supplies, such as the cost of the trailer itself if you've purchased it. If you are running a business that uses a fleet of trailers, your investment in these devices would be a capital expense, not a deductible, which you can depreciate over a period of several years as an adjustment to income.
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