Should You Own Your Business Vehicle?
by Barbara Weltman on August 19th, 2009
With car dealerships offering amazing bargains, now may be a good time to get a new business car, truck, or van. Decide whether to buy or lease the vehicle, and who should hold title to it.
If you own or lease the car:
If a personal vehicle is used for business, you can deduct the actual expenses of business use, including gas, maintenance, and depreciation if you own the car or lease payments if you lease it, or use the standard mileage rate set by the IRS ($.55 per mile in 2009).
If you are an employee of your corporation, set up an “accountable plan” to provide reimbursement to you for business use of the car; such reimbursement is tax free if done properly. Without such a plan, any deduction for car use is an unreimbursed employee business expense, which is a miscellaneous itemized deduction that can be claimed only to the extent that it is more than 2% of your adjusted gross income (AGI).
If you are a partner or LLC member, vehicle-related write-offs are claimed on Schedule E; they are not subject to the 2% limit applicable to shareholder-employees.
If you are a self-employed person, vehicle-related write-offs are claimed on Schedule C.
Idea: Keep good records of business use. Note the starting and ending odometer reading, the date, the destination and the purpose of each business trip. Keep a digital device, logbook, or other recordkeeper handy to make it easy to jot down this information.
