: How to depreciate in terms of taxes? So, Let's say I have a very small business and I make about 10,000 USD in sales. Let's assume there are 0 expenses. So, my profit is about 10,000 USD for that year. Assume the tax rate

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With vehicle expenses for business you can opt to take actual expenses or a standardized rate per mile (currently [CO].58/mile). If you take actual expenses, you'd typically depreciate the vehicle cost over 5 years, but there are several depreciation options. The options front-load the deprecation expense to varying degrees, it can range from taking the purchase price in 5 equal parts to taking the entire purchase price in the first year.

If the vehicle is 100% business use, you could most likely take the entire ,000 vehicle cost as depreciation expense in the year you purchased the vehicle. In this scenario the actual costs would wipe out all of your profit and you'd have no tax burden. Since you'd also have insurance/fuel/tax/maintenance costs associated with the vehicle you'd actually have losses. However, you'll have no depreciation expense to use against next year's revenue. If it's not 100% business use then you have to track business miles and apply the percentage of business miles against the actual expenses (including depreciation).

Choosing whether to take actual costs or the standard mileage rate is a decision you should research a fair bit first, and then if you decide to take actual expenses you'd then need to spend time deciding which depreciation option is best for you. This is an area where paying for advice from a professional could be worthwhile since pretty much any of the available options can be the right choice depending on your circumstances.

Here are a couple articles on the topic:
Actual Expense Method Versus Standard Mileage Rate Under the Tax Cuts and Jobs Act
Car Depreciation: How to Calculate Your Vehicle Depreciation Deduction