Can I Claim a Tax Deduction for Purchasing a Vehicle for My Business?
Many business owners that are in the process of purchasing or leasing a vehicle, get the idea of executing the transaction through the business.
The thought that they have is, "Why not, I can probably claim a tax deduction.
" Although it may seem logical, being able to legally claim a tax deduction depends on exactly how the vehicle is used.
Is the Vehicle for Business Use? Generally speaking, if you intend to use a vehicle only for business purposes, then it would make a lot of sense to purchase or lease the vehicle with the company's funds.
Is the Vehicle For Business & Personal Use? If you intend to use the vehicle for both personal & business purposes then, you could still expense the cost but you would only be allowed to expense the portion associated with business use.
Clear Distinction Between Business & Personal Use The IRS makes it very clear that you cannot expense vehicle related costs for a business if the vehicle was for personal purposes.
So, a small retail business that rarely uses vehicles for business purposes would not qualify for this tax deduction.
To determine if you qualify, first do an audit of your vehicle usage & determine the breakout of how much would be used for your business vs.
personal.
If it's a mix, make sure you are able to support your claim with documentation should it be needed in the future.
If you do get audited, the IRS will want to see the supporting documentation that substantiates the allocation between personal and business expenses.
The thought that they have is, "Why not, I can probably claim a tax deduction.
" Although it may seem logical, being able to legally claim a tax deduction depends on exactly how the vehicle is used.
Is the Vehicle for Business Use? Generally speaking, if you intend to use a vehicle only for business purposes, then it would make a lot of sense to purchase or lease the vehicle with the company's funds.
Is the Vehicle For Business & Personal Use? If you intend to use the vehicle for both personal & business purposes then, you could still expense the cost but you would only be allowed to expense the portion associated with business use.
Clear Distinction Between Business & Personal Use The IRS makes it very clear that you cannot expense vehicle related costs for a business if the vehicle was for personal purposes.
So, a small retail business that rarely uses vehicles for business purposes would not qualify for this tax deduction.
To determine if you qualify, first do an audit of your vehicle usage & determine the breakout of how much would be used for your business vs.
personal.
If it's a mix, make sure you are able to support your claim with documentation should it be needed in the future.
If you do get audited, the IRS will want to see the supporting documentation that substantiates the allocation between personal and business expenses.
