BUSINESS EXPENSES: Can I write off a vehicle purchase?
This is just an overview of the question. For more detailed explanation see the publications below.
If you have a business, you need to be familiar with the rules for business expenses. I am a simple guy and don’t do will with legal speak. Everything you need is in the US Code Section 26. However, the IRS has publications that explain the code sections in plain English. You can’t use a publication as a legal reference or defense. You can use it to understand what is allowed.
These publications for IRS.GOV are the ones I go to when explaining business expenses. I highly recommend reading them:
Publication 334 – Tax Guide for Small Business
Publication 535 – Business Expenses
”If you use your car or truck in your business, you may be able to deduct the costs of operating and maintaining your vehicle. You may also be able to deduct other costs of local transportation and traveling away from home overnight on business.” – Publication 334 Page 31
This is not going to get deep into depreciation, selling, and other aspects of car and truck expenses. This is more of an overview.
This was recently asked in a Reddit post on r/taxhelp: “If I buy a Tesla Model X now and it arrives in 2022, can I write it off on 2021 taxes?” The answer to this question is no. You have to put assets in service to “write it off” for 2021 prior to December 31, 2021.
Then the conversation went – “I do need it and it will be only used for business, 90% business 10% personal I don’t leave the house unless it is for business. I need to make long commutes occasionally and I’d love to do in in a full self-driving car. So would I have to before this year ends to be eligible?” ANSWER: Yes
Next – “I own a clothing store, and have to drive there daily https://www.section179.org/ On this website, it shows there is 100% bonus depreciation on vehicles over 6000 pounds for 2021.” My answer to this is twofold. If you are using it to commute from home to work (in this case his store) and back again, then the commuting miles and use is personal. I do not care what kind of vehicle it is. If the “commute” is between several stores during the day, then those miles are deductible.
The vehicle must be used for over 50% for the business (NOT commuting to and from work). You need to define the business purpose of the vehicle and how it is used for the business. You would not buy a printing press just for the “tax write off” if you owned a clothing store. I would be asking how is this vehicle purchase going to improve the business? If you own an accounting business, how would it improve business? If you own a xxxxxxxxx, how would it improve or benefit the business? Not benefit you personally.
This topic could go on and on. You can see how it can be a difficult question. It depends on several factors. My advice is to contact a professional that can research the issue and give an answer based on your specific circumstances. You can call me at 712-274-3469 or set up an appointment with me on Calendly
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