Must a work vehicle be used exclusively for my business?
FSB answers this question and helps an entrepreneur prove on paper that his wheels are "work-only." Do you overlap your work and personal transportation? What vehicle do you use? What tips can you offer about keeping a clear log of the vehicle?Â
From Rob, Orlando Florida I am a Residential Real Estate Appraiser in Florida and as such drive up to 60k miles a year. I have a single 1998 Ford F-150 4×4 in my name and claim depreciation as well as itemized vehicle expenses each year. I maintain a mileage log for each day's appraisals with beginning mileage and ending mileage for each business trip. The point in the article about specific use for the business was a good one. In my case it is as simple as hardwiring a power invertor so I can use my laptop and digital camera charger while on the road. I could also easily argue that my 4×4 vehicle is neccessary to gain access to some of the rural properties in Florida that I appraise. Not every mobile home has a paved road and adequate drainage. My business is arranged as a sole proprietorship so I can claim depreciation on the business assets without having the business itself own them. Keep in mind that this rule is for any business asset including computers etc. Just keep in mind that the economic life (which is used to calculate the depreciation) varies depending on the asset class, and I believe you must use the asset for at least 50% business use in order to depreciate it.
Rob
From Jay, Selden, NY I have a business and we have 2 trucks that are used soley for the business and business purposes. But when I go out on sales calls or meeting a client to discuss contract specifics I tend to you my personal car. What I do for a tax write off does include keeping a log of mileage dates and purpose of trip but only for the business trips and paying 48.5 cents per mile to myself from the business. This is fully tax deductable but the business can't depreciate the value of the car with this method (since it doesn't own it. It pays to use it)
I am a CPA in Arizona. The previous comments are valid. The key to supporting your business usage is a contemporaneous log of your activity. There is another factor that needs to be considered – Is the claimed expense "Reasonable and Necessary" for the activities of the business? In the question of a SUV; why do you need this type of vehicle in your business. Unless you are carrying a large group of passengers and/or lots of cargo on a routine basis; there's no reasonable need for a SUV. This question applies to all of your claimed business expenses. If I were an IRS auditor, this is the approach I would take to all of your claimed expenses. Above all, be smart in your claimed deductions. Several years ago, there was an article in the local newspaper about business owners purchasing new vehicles on the last day of the year for the express purpose of claiming the Section 179 accelerated depreciation deduction. There was a picture of the owner with his new SUV with his young kids in the back seat. This completely defeats the business purpose of the vehicle and the deduction. Since the IRS has three years after filing of a return to audit the taxpayer; wouldn't you think that the IRS would wait until the last moment and audit the guy. They'll collect interest, underpayment penalties as well as negligence penalties for filing a erroneous tax return. In other words, if it's a business vehicle; make it truely a business vehicle even if it means purchasing a car strictly for personal use.