How to Write Off Your Car As a Small Business Owner | Vehicle Tax Deductions

cars these days can cost a ton of money luckily if you run a business that requires the use of a car a truck or another type of vehicle you can write off your vehicle expenses and offset some of those costs by saving on taxes so i've peeked through the tax code for you and found 11 and a half auto deductions that you can use to lower your tax bill for years and years to come and the best part is that you're paying for these expenses anyway so you might as well write them off so let's talk about who is eligible how you can easily qualify go through the 11 and a half deductions that can save you money and end with a few tips so that you can take the deduction the right way let's get into it [Music] starting with who is eligible to write off their vehicle expenses the answer business owners specifically business owners that use a vehicle for their business and look you might be saying quran i don't use my vehicle for business this doesn't apply to me well wait a second because using your vehicle for business includes traveling from job to job traveling to customers and clients and traveling from your place of business to perform business activities and using your business for business activities is my favorite one that's the loophole because almost all business owners use their vehicle to go to the bank to pick up supplies to check your business mailbox and so on and so on which puts auto related deductions within reach for nearly everyone in addition the auto related deduction can be used for several different types of vehicles including trucks suvs motorcycles delivery vans basically anything that doesn't fly or use railroad tracks but do not miss this next thing because i do not want you to get in trouble with the irs here's what i want you to know the auto related deductions i'm talking about in this video does not include travel expenses and travel expenses are things like plane ticket taxis rental cars tolls parking hotels airbnbs you get it travel expenses are a totally separate deduction so if you're interested in travel related write-offs i'm going to place a video in the description that'll tell you all about it so watch it after this video okay the moment you've all been waiting for here are the 11 and a half vehicle expenses that you can write off to lower your tax bill number 11 mileage aka the standard mileage deduction with this deduction you write things off based on the number of miles driven for business so for this year you can write off and a half cents per mile driven the standard mileage deduction is an all-inclusive deduction that attempts to package everything that can be claimed as a vehicle expense into a simple and easy to calculate deduction and say you take the standard mileage deduction you won't be able to take most of the other deductions on this list once again it's set up to be all-encompassing just make sure you keep good records and i'll show you how to do that at the end of the video okay let's move on to the other vehicle expenses you can write off and almost all of the other deductions on this list is from a method called the actual expense method which on a high level is the second way that you can write off vehicle expenses and when you deduct vehicle expenses using the actual method you are allowed to deduct the percentage use used for business you know what kron i'm gonna write off 100 of my vehicle expenses i wouldn't recommend that it looks very fishy that you use a car 100 for business especially if you don't have another vehicle registered to you so say you drive 10 000 miles for the year on your vehicle some of those miles are going to be personal miles driven right like going to target or or a road trip to florida so you drove 10 000 in total but 3 000 of those miles were used for business in that case you can deduct 30 percent of your vehicle expenses using the actual expense method so what expenses can you write off using that method well number 10 on our list is gas and charging costs and look with the price of gas increasing we are happy to see this deduction and once again this is not just for gas because those with an electric vehicle or a hybrid vehicle are able to write off charging costs something i love to do on my tesla model y so the percentage use that you use for business when paying for gas and charging costs can be deducted but once again remember that this is for business use so you want to keep track of all charges specifically for business number nine vehicle fees yes you can deduct associated fees related to your vehicle for example you have a aaa membership or roadside assistance program that you pay for separately you can deduct those fees number eight insurance because you are a law abiding citizen you have insurance on your vehicle which can be written off and if your insurance happened to cover things like towing rental cars or other add-ons those can also be written off number seven and one of my personal favorites lease payments if you use a car for business that happens to be on a lease then those lease payments can be written off as a business expense now the irs is generous but here's something i want you to know if the fair market value for that vehicle exceeds a certain amount and for this year that's 56 000 for a passenger car suv or van then something called an additional lease inclusion will be added to your gross income which simply means that that deduction for your lease payments will be reduced but that differs when your vehicle is over six thousand pounds something that we'll talk about a little bit later number six on the list repairs if your vehicle needs any repairs during the year then those repairs can be deducted this also includes maintenance so don't forget to add on those wipers bulbs oil changes air filter changes and more so if you drop a bmw you can now write off all of those costly expenses i'm just kidding seriously all right number five is oil so we've already talked about gas but any other oil that you put in your car can be deducted brake fluids transmission fluids coolants all can be deducted number four tires all tires in wheel related fees can be deducted so if you need new tires in alignment air those are vehicle expenses that you can write off now if you're like me you love to keep your car looking clean and to do that you need to wash your car so number three on our list washes washes are considered maintenance and therefore can be deducted this can also include detailed work that keeps your car looking spectacular and look if you're one of those folks who just swear by hand washing or we're going to the car wash you can write those off too number two on the list is registration costs your car registration is a fee that can be deducted and this expense is an exception because you can take it even if you took the standard mileage deduction all right numero uno on our list is depreciation you can write off depreciation on your vehicle if you do not take the standard mileage deduction well how come it's because the standard mileage deduction already includes depreciation however there are a few rules to consider when looking to write off depreciation passenger vehicles light trucks and vans can only be depreciated up to a certain dollar amount and the limits for vehicles placed into service this year are the following for the first year nineteen thousand two hundred dollars that drops to eleven thousand two hundred dollars if you do not take bonus depreciation in the second year you can write off eighteen thousand dollars in the third year ten thousand eight hundred dollars and every year after six thousand four hundred and sixty dollars and now we're down to lucky number .5 and that's section 179 and bonus depreciation the irs allows you to take an enormous amount of depreciation when you use section 179 and or bonus depreciation and in some cases allows you to write off 100 of the vehicle purchase price in the first year so for example vehicles over six thousand pounds like the tesla model x or the bmw x6 have the ability to be deducted at a hundred percent cost for the first year in service when thinking about depreciation and whether you should take section 179 or bonus depreciation or maybe both here's something you should know section 179 is limited to your taxable income but bonus depreciation can be used to create a net loss which makes bonus depreciation a very popular option for those looking to take depreciation by itself or even in conjunction with section 179 in either case to take depreciation with section 179 or bonus depreciation you must use your vehicle for business at least 50 percent of the time and if you drop below 50 for any year you will be forced to pay back that depreciation that you took in the first year of business so you're looking to write off your vehicle and wonder should you take the standard mileage deduction or the actual expense method well the answer is gonna depend on the vehicle and how it's used here are some things to consider if you're going to have a ton of business miles and the car is relatively cheap the standard deduction might save you more in taxes especially when you consider uber drivers lyft drivers and food delivery people now say you have relatively low mileage but relatively high cost on things like gas and charging maintenance insurance etc the larger the expenses the larger the deduction with the actual expense method but in either scenario you should calculate both methods to see which one will give you the highest tax benefit now let's touch on something super important something you can't miss if you want to write off your vehicle expenses and that's the importance of good record keeping the irs is very strict about writing off your vehicle so your best bet is to keep a very detailed log of all miles driven in all expenses and to make this easy use a single credit card or a single debit card for all of your business expenses and if you're a rideshare driver or a food delivery person then usually those companies already have apps that help you track your miles so make sure you keep up with them but for the rest of us who don't have someone already tracking our mouse for us you can use an app and an app that i like to use is called trip log and not only does triplock help you track your miles it also helps you to track your business related expenses so i'm going to place a video on the screen i think you should watch next be sure to watch that video and do me a favor hit that like button for me if you enjoyed this video it truly helps other entrepreneurs find this video and benefit from this video and look while you're at it subscribe to the channel for more information that helps you save on taxes and build your businesses i'm caron from life accounting and i'll see you in the next video

Channel: LYFE Accounting

Views: 30,023

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Id: Zy-biPpupng

Length: 11min 50sec (710 seconds)

Published: Mon May 02 2022