How $300,000 of Roll-Off Equipment Can Offset Wages, and When Trailer Rentals Cannot

You can usually deduct the whole cost this year. Whether that deduction comes off your spouse's W-2 salary depends on whether the IRS sees your business as a rental activity.

Our position is that a dumpster business is a hauling service that happens to own containers. That keeps it out of the rental rules, so an owner who drives the truck can use the loss against wages. Trailers rented out by the month land on the other side of the line.

1 A dumpster customer is paying for hauling

A rental activity is passive however many hours you put in, and the real estate professional exception covers only rental real estate, never equipment. So the first question is whether a dumpster business is a rental activity.

The cleanest route is the seven-day rule. If customers keep containers seven days or less on average, the activity is not a rental activity whatever they pay for. Check whether your jobs run longer than that. The final regulation averages each class of property separately and weights each by its share of gross rental income, so work it from dispatch records each year, not as a simple per-job average.

The second route, and our position, is a payment test. An activity is a rental activity only if customers pay "principally for the use of tangible property," whether the contract is called a lease or a service contract. In our worked example (section 7) the owner charges $500 a job and allocates it as $250 for delivery, pickup and the haul, $150 for the landfill tipping fee, and $100 for up to seven days of container time. Container time is $100 of $500, or 20%, with the fee in. Set the tipping fee aside as a pass-through cost and services are still $250 of $350, about 71%. This is the weaker route. The split is the owner's own allocation, and under section 7701(e) the IRS can look past the labels, weighing that the customer has the container in hand and controls it on site.

One regulation example supports this by analogy. A company hauling customers' goods in its own tractor-trailers, driven by its own staff, is not a rental activity even with average use over 30 days, because the customers' use of the trucks "is incidental to their receipt of personal services." That example rests on the extraordinary personal services exception, and those trucks never leave the company's drivers, while a container sits on a driveway for days alone.

2 Everything in the yard is 5-year property

Recovery periods come from Rev. Proc. 87-56, reprinted as Tables B-1 and B-2 in IRS Publication 946. Every asset in a roll-off yard gets five years under the general depreciation system. Class life still matters for the alternative depreciation system and the section 179 lessor test in section 5.

The truck class turns on actual unloaded weight, 13,000 pounds, not the rating on the door. For containers we made a judgment. Table B-1 has a class for "trailers and trailer-mounted containers," but a roll-off container rides on the truck and sits on the ground, so we do not read it as trailer-mounted. An asset Table B-1 does not describe takes the class of the activity it is used in, and property with no class at all is 7-year property (12 years under the alternative system). We use 42.0, which covers "the commercial and contract carrying of freight by road." If you see the business as a service under 57.0, the class life is 9 years. The three candidate classes all give 5 years under the general system. Only in the remote case that containers fit no class would they be 7-year property.

Trailers you rent out stay in 00.27. The lessor rule is the older asset depreciation range rule still used to classify leased property. Its main rule classifies leased property "as if the property were owned by the lessee," such as 15.0 construction for a builder, which is also 5-year; containers treated as leased would land there too. Its exception says a class based on the type of property, "such as trucks or railroad cars," applies "without regard to the activity of the lessee," and 00.27, which also covers trailer-mounted containers, is that kind of class.

3 A heavy roll-off truck needs no mileage log

The luxury auto caps stop at 6,000 pounds of gross vehicle weight for a truck, far below any roll-off truck.

Listed property is harder. The code includes "any other property used as a means of transportation," which the regulation says covers trucks. It gets bonus depreciation only when business use tops 50%, and section 274(d) disallows the deduction unless you back it with adequate records or sufficient evidence corroborating your own statement.

Two rules exempt a roll-off truck. First, the code excludes property used substantially all the time in a business of transporting persons or property for hire for unrelated customers, which a hauler moving debris for a fee may fit. Second, the regulation removes any qualified nonpersonal use vehicle, and section 274(d) itself ends by saying it does not apply to one. The list in Treas. Reg. §1.274-5(k)(2)(ii) includes "any vehicle designed to carry cargo with a loaded gross vehicle weight over 14,000 pounds" and "dump trucks (including garbage trucks)." A roll-off truck qualifies under the cargo-vehicle line if its loaded gross vehicle weight rating is over 14,000 pounds. A hook-lift body on a light chassis may not be, so read the rating on the door. Below that line, unless the for-hire rule covers it, keep a mileage log.

The cargo-vehicle line is not limited to trucks, so a heavy cargo or equipment trailer rated over 14,000 pounds loaded may fit it, though no regulation or ruling says whether a trailer counts as a vehicle here. Light trailers have no such route, and the for-hire rule does not help, because renting a trailer out is not a transportation service. We treat light rental trailers as listed property. Rentals to unrelated customers are business use; renting to a relative or a 5% owner is not.

4 Bonus depreciation takes the whole cost in year one

Property acquired after January 19, 2025 gets 100% bonus depreciation, and P.L. 119-21 repealed the old phase-down schedule. If you signed a written binding contract for the truck on or before January 19, 2025, it counts as acquired then, whenever it was delivered. A used truck qualifies if neither you nor a predecessor used it before you bought it and you bought it from an unrelated seller. Used containers qualify on the same terms.

Depreciation starts when the asset is ready and available for its use. A container in your yard ready to drop counts in 2026; one still at the fabricator does not.

You can elect out of bonus depreciation, but the election covers every asset in the same class placed in service that year. Trucks, containers and trailers are all 5-year property, so you cannot elect out for the trailers alone. Section 179, which lets you choose assets one by one, is the practical way to expense some and depreciate the rest.

5 Section 179 is the backup, with an extra test for lessors

The section 179 deduction is the other way to expense equipment. For tax years beginning in 2026 the limit is $2,560,000, reduced once you place more than $4,090,000 of section 179 property in service during the year. Section 179 cannot exceed your taxable income from the active conduct of a trade or business, and wages count toward that figure, including a spouse's on a joint return. With $230,000 of wages, section 179 could produce a business loss much like bonus. Bonus has no income limit at all.

Section 179(d)(5) bars a noncorporate lessor, such as an individual or partnership, from the deduction unless two tests are met. The lease term, counting renewal options, must be less than half the class life. That means under three years for a trailer in 00.27, under four years for a container in 42.0, under four and a half in 57.0. And in the first 12 months after the property goes to a customer, your section 162 deductions for it, other than rent and reimbursed amounts, must exceed 15% of the rental income it produces.

A dumpster business that is a service is not a lessor, so the test never comes up. Trailer rentals are leases. Daily and weekly rentals pass the term test, and the 15% test turns on spending, so track repair, insurance and registration costs by trailer.

6 Your hours decide whether the loss offsets wages

Once the dumpster business is a trade or business, the loss is nonpassive if you materially participate. The cleanest test is more than 500 hours in the year, which a full-time driver-owner passes by spring. Even with no mileage log, keep an hours log.

Trailers turn on how long customers keep them. If the average rental is seven days or less, trailers are not a rental activity, and material participation decides, the same as the dumpster business. If contractors keep them by the month, so the average runs past 30 days, they are a rental activity and the loss stays passive no matter how much you work.

7 A $300,000 roll-off start, worked through

Take a married sole proprietor filing jointly who drives the truck full time and in 2026 buys a used tandem roll-off truck and thirty new 20-yard containers. The owner bills 900 jobs at $500, split as in section 1, and the spouse earns $230,000 in wages.

The loss is nonpassive, because the owner clears 500 hours. It is also under the excess business loss limit, which for 2026 lets a joint return deduct up to $512,000 of net business loss against other income ($256,000 single). All $160,000 comes off the spouse's wages this year.

Now add six dump trailers at $14,000 each, rented by the month to contractors, so the average rental runs past 30 days. They earn $40,000 of rent less $10,000 of expenses, or $30,000, and $84,000 of bonus turns that into a $54,000 passive loss. It carries forward until the owner has passive income or sells the whole trailer activity to an unrelated buyer in a fully taxable sale.

8 Selling or trading in the truck

Trucks, containers and trailers are section 1245 property. Gain on a sale is ordinary income to the extent of the depreciation already deducted, and with 100% bonus that usually means the whole sale price. It goes on Form 4797.

A trade-in is a sale, because since 2018 like-kind exchanges cover only real property. Say the owner trades the $165,000 truck in 2030 for a $90,000 credit toward a $210,000 truck. The old truck has no basis left, so the full $90,000 is ordinary income in 2030. The new truck is eligible for bonus, so the year nets to a $120,000 deduction.

9 What to do before December 31

• Check the door rating on every truck. Over 14,000 pounds loaded needs no mileage log; at or under, start one now, unless it is a dump truck or used for hire.
• Have containers ready to drop in your yard by December 31, or the deduction moves to 2027.
• Set trailer terms on purpose. An average of seven days or less keeps trailers out of the rental rules, and monthly contractor rentals put them in.
• Log your hours on routes, swaps, landfill runs, dispatch and repairs.
• Before the next trade-in, put the recapture and the new truck's bonus on the same projection.

Model a truck, container or trailer purchase before it closes. Our tax planning work classes each asset, tests the rental and hours questions, and projects the trade-in year.

General information for owner-operators, not tax advice for your situation. Thresholds change and state treatment varies; confirm current requirements for your own facts before acting.