WorldWide Drilling Resource

Drilling Into Money Not Boring by Mark E. Battersby Vehicles = Moving Deductions Thanks to the 2017 Tax Cuts and Jobs Act, those drilling professionals with vehicles in their business are finding it easier than ever to write off the cost of buying and maintaining them. The 2019 tax year began with new deductible mileage rates for vehicle usage. According to the Internal Revenue Service, the standard deduction rate for using a car, van, pickup, or panel truck for business purposes is 58 cents per mile, up 3.5 cents from 2018. While every drilling operation and business, at least those with fewer than five vehicles, can use the business standard mileage rate, using the actual cost of operating a vehicle or vehicles for business purposes is frequently more advantageous. When it comes to writing off the cost of passenger autos, trucks, and vans, there are caps on the amount which can be deducted under the so-called “luxury” car depreciation rules. For passenger automobiles, the depreciation limits for the first three years are $10,100, $16,100, and $9700 respectively, and $5760 for each succeeding year. Passenger automobiles, for which the Section 179 first-year expensing rules apply, have limits for the first three years of $18,100, $16,100, and $9700 - with $5760 allowed each succeeding year. The rules for the Section 179 expens- ing means the cost of qualified vehicles and other proper t y wh i ch can be expensed in 2019 is $1 million (up from the earlier $510,000 limit). However, the $1 million limit phases out once total investments for the year exceed $2.5 million. There is also a silver bullet called “bonus depreciation.” For 2019, bonus depreciation applies to 100% of the cost of qualified property, whether new or used - with no limit. Despite the new generous dollar limits, expensing con- tinues to be limited to the drilling opera- tion’s taxable income. Many drilling businesses are also eligible to claim a tax credit or a refund for gasoline, diesel fuel, or kerosene, used in nontaxable, off-road applications. A federal excise tax of 18.4 cents per gallon is imposed on gasoline, and clear diesel fuel of 24.4 cents per gallon. Many drilling-related businesses must live, and in many cases suffer, with today’s tax laws - especially the deduction limits for cars, vans, light trucks, and SUVs. Or, they might be able to write off a portion of the vehi- cle’s purchase price, but guidance by a qualified professional is always strongly recommended. Mark Mark E. Battersby may be contacted via e-mail to michele@ worldwidedrillingresource.com 43 WorldWide Drilling Resource ® AUGUST 2019 The Bible is the most shoplifted book.