Small Business Tax Savings Podcast How Do I Write Off a Business Vehicle?
Using a car for your business comes with expenses but it also has tax deduction benefits. In this episode, we break down everything you need to know before you decide to buy or lease a business vehicle and how you can take a tax write-off and save money.
[02:27] Should I Buy or Lease a Vehicle?
- How often do you expect to drive it?
- If you're going to be driving a lot of miles, a lease might not be a good option
- How long do you plan to keep it?
- A lease is better if you always want a new vehicle
- How much do you want for your monthly payment?
- Lease payments are generally less than a loan
[04:45] Should I Put the Vehicle Under My Personal Name or Business Name?
- Find the Business Use Percentage (BUP) = Business Miles / Total Miles
- If the vehicle is going to be used for business (>50%), it is recommended to put it in the business name
- If the vehicle is going to be used for personal (>50%), it is recommended to put it in your personal name
- S or C Corp: use an accountable plan to reimburse yourself
- Sole Proprietor or Single Member LLC: include the business use on the Schedule C filing
[08:41] How Do I Write Off a Business Vehicle?
- Mileage Method: you get a specific tax deduction per mile driven
- If you use the vehicle for business less than 50% of the time, you must use this method
- Actual Method: BUP x Total Actual Expense
- If you use the actual expense method, you cannot also use mileage deduction
- When disposing of a purchased vehicle, you will have a gain or loss depending on the basis of the vehicle
[13:17] How Does Depreciation of a Business Vehicle Work?
- If Gross Vehicle Weight Rating is more than 6,000 pounds: you can write off 100% with bonus depreciation
- If GVWR is 6,000 pounds or less: you can write off up to $19,200 in 2022 if you buy it and place it in service before year-end
[16:39] Final Thoughts
- Always keep a mileage log and track all of your expenses
Key Quote
“If you're going to have a business vehicle, make sure you record your mileage, track it, do all that extra legwork you need to do to prove the business use of that vehicle.” - Mike Jesowshek
Resources Mentioned
Blog Posts:
- https://www.taxsavingspodcast.com/blog/how-do-i-write-off-a-business-vehicle
- https://www.taxsavingspodcast.com/blog/what-do-i-need-to-know-about-purchasing-deducting-and-depreciating-a-business-vehicle
Podcast Episode:
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Podcast Host: Mike Jesowshek, CPA - Founder and Host of Small Business Tax Savings Podcast
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