November 21, 2024 • 12 mins
Did you know you can write off your personal car as a business expense? Many business owners miss out on this deduction because their accountants don’t suggest it, or they aren’t aware of the benefits. In this podcast, I’ll break down step-by-step how you can claim your personal car as a tax write-off through your S-Corporation.
I've put together this FREE resource for you:
7 Write-Offs Every S-Corporation Business Owner MUST Know
🆓 Download FREE PDF here: https://7taxwriteoffs.com/
Ready to start saving money on your taxes?
☎️ Schedule your FREE Tax Advisory Session: https://taxplanningcall.com/
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*Disclaimer This material & presentation content is for informational and educational purposes only. This material and presentation content is designed to provide general information regarding the subject matter covered. It is not intended to serve as legal, tax, or other financial advice related to individual situations. Because each individual’s legal, tax, and financial situation is different, specific advice should be tailored to the particular circumstances. For this reason, ...
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
If you use your personal car in your business,
especially in your S-Corporation, well, guess what?
Irs allows you to claim thatvehicle as a tax write-off
against your business income,even though the car is under
your personal name.
Now, a lot of accountants don'treally know how to do this
properly and they disallow anddo not let their clients that
(00:24):
are profitable business ownersto take this deduction.
They say, no, the car is underthe personal name.
I'm not really sure how we'regoing to take this deduction and
you're not allowed to.
I'm going to show you exactlyhow to use this tax strategy,
even if you're using yourpersonal car for your business,
your S corporation, and at theend I'm going to give you a tax
strategy that you can literallyjust take it to your account and
(00:47):
be like, hey, this is how youdo it and let's take this tax
deduction.
Ready, let's get started.
Speaker 2 (00:53):
Welcome to the tax reduction podcast for
money-making entrepreneurs withBoris Mushaev.
Boris has helped entrepreneursacross the United States
collectively save millions ofdollars in taxes with the power
of tax planning and advisory.
The only way you, the businessowner, can save money on taxes
is by using proactive taxstrategies, and this podcast is
(01:14):
all about saving you money ontaxes.
Boris will share with youin-depth and easy to understand
tax reduction strategies thatyou can implement in your
business within 30 days or less.
Let's jump into today's episode.
Speaker 1 (01:27):
All right, perfect.
So we're going to talk abouthow can you write off your
personal car that you use thatis, under your personal name
against your S corporation.
Before we continue how you cando that, we really need to
understand what is anaccountable plan, because an
accountable plan is somethingthat is allowed by the IRS.
It's a mechanism that you canuse to reimburse yourself
(01:51):
personally from the business forthe use of your car, including
other expenses that you incurpersonally but for the sake of
the business.
Now, accountable plan is apiece of document that is not
filed anywhere with the IRS oryour tax return.
An accountable plan isbasically just a document that
is filed with your files and,based on the accountable plan,
(02:13):
it says that the business, yourS corporation can reimburse you
the business owner, who alsohappens to be an employee of the
business for any expensespersonal expenses that you
incurred on behalf of thebusiness.
Now, when you have a personalcar that you use for the
business, you obviously incur alot of expenses.
(02:35):
You've got gas that you pay for, maintenance, repairs,
insurance, interest if yourvehicle is financed, or lease
payments.
So whatever the business usagepercentage is of your business,
you can every month reimburseyourself.
Literally, you just write out acheck from the business and you
(02:56):
get that as a business taxdeduction and it goes to your
personal account completelytax-free.
That is an accountable plan.
This is one of the main waysthat you as a business owner can
actually write off a personalvehicle that you're using for
the business.
Because when you try to put thepersonal vehicle, the title of
(03:16):
the vehicle, under the business,it gets expensive, especially
with insurance.
So a lot of business ownersthey don't want to do that.
They're using their vehiclemaybe 20%, 50% or even 70% of
the time for their business andthey want an easy way out.
Just paying for these expensesdirectly from the S-corporation
won't be a deduction for you,but if you use an accountable
(03:38):
plan in which you reimburseyourself for the business usage
of that vehicle, that becomes atax deduction.
Now I'll tell you a little bitabout how we handle things in
our firm, our tax advisory firm.
For our clients Majority ofclients that use their personal
car for the business less than70% business use we use an
(04:01):
accountable plan, no questionabout it.
We track their expenses.
We even calculate thedepreciation to make sure that
we include it all and everymonth the business owner gets a
tax-free check from the businessfor using the car and the
business gets a write-off.
Now it gets a little bit trickywhen you've got a car, a
personal vehicle that you usefor your business.
(04:22):
That is more than 70%.
So in our firm, what we usuallydo we do not use an accountable
plan at this point we basicallyplace the vehicle under the
business, not the title of thevehicle, but basically for tax
purposes.
You can do that.
You can record this vehicle asan asset investment by the
business, even though the ownerbought it.
(04:44):
Now this is where you need yourtax advisor, because your tax
advisor will know exactly how todo that.
And again, when we place itunder the business, we don't
deduct 100% of expenses, butwhat we deduct is whatever the
business usage is.
So let's say the business usesthis vehicle 80% of the time for
the business, then 80% of theexpenses from the business will
(05:04):
be deductible and there's a wayto record it, including that
depreciation.
So it's really, reallyimportant to understand that if
you've got a car that is underyour personal name, you can
absolutely deduct it as abusiness expense.
Now, right after this break,we're going to talk about how
can you claim depreciation onthis personal vehicle in your
(05:27):
business right after this break.
Speaker 2 (05:29):
If you have a tax preparer and you do not have a
tax advisor, the only way youcan save money on taxes is by
using proactive tax planningstrategies that only a tax
advisor can give you.
Boris put together a free PDFfor you, the business owner
Seven tax write-offs everyS-corporation business owner
must know.
In this PDF, you can find seventax strategies that you can
(05:52):
start using in your business toinstantly start saving money on
taxes.
Click on the link in thedescription below for a free
download.
Speaker 1 (06:00):
All right, perfect and welcome back.
Let's talk about how can youclaim depreciation of your
personal car in your business.
Before we talk aboutdepreciation, I want to bring
your attention to two types ofmethods that you can reimburse
yourself, or really I should say, two types of deductibility
methods of your vehicle.
So there's something that'scalled standard mileage
(06:21):
deduction, meaning to say theIRS says look, instead of you
using the actual expenses ofyour business, what you can do
is just reimburse yourself.
Again, using the accountableplan that we spoke about earlier
, reimburse yourself for everybusiness mile that you drive.
So how much is thereimbursement?
67 cents per each mile, okay.
So a hundred miles, that's a$67 reimbursement.
(06:44):
A thousand miles and you can dothe math.
Okay, so the IRS says look,let's keep it simple.
You can reimburse yourself 67cents per mile.
Generally, what we do in ourfirm for our tax advisory
clients, we use the standardbusiness mileage rate given by
the IRS if the business owneruses the personal vehicle less
(07:07):
than 50% for the business.
In most cases and I'm notsaying in all the cases, right,
that's why you have to make sureyou're working with a tax
advisor In most cases thestandard mileage rate of 67
cents per mile works better thanactual expenses.
If the car is being used lessthan 50% for the business and
when you're using the standardmileage rate, there is no
(07:28):
depreciation.
You're not taking any actualexpenses, you're just really
reimbursing yourself for themileage that you use for the
business.
Now the second method areactual expenses, and that is
again where you can use theaccountable plan and reimburse
yourself for actual expenses,including the depreciation.
Now the question really becomeswhen should your accountant
(07:51):
report this vehicle that youbought personally and now using
it for the business?
When should your accountantreally report it under the
business books?
So I'll tell you again what wedo for our clients and we try to
(08:12):
you.
Right now.
You're most likely overpayingin taxes every single year, not
by this much, but by this much.
What you need is a tax advisor.
You need somebody that uses taxplanning strategies, but not
only tax planning strategies,but using those strategies and
properly reporting it on yourtaxes.
Now, in this particularsituation now coming back to
(08:35):
what we do for our clients, ifthe client uses the car less
than 50% for the business, inmost cases we use standard
mileage rate If it's between 50%to 70% of the business.
This is where we kind of dosome analytical.
We basically get someanalytical thinking going and do
some calculations and see, hey,which is the better, the
standard or the actual Over 70%?
(08:58):
That becomes very interestingbecause what happens in most
cases?
Actual expenses are morebeneficial because if the car is
new and it was expensive, thenyou can also use a really nice
depreciation deduction.
Now, again, with an accountplan, you can reimburse yourself
from the business for thatdepreciation or you can
(09:18):
literally take this vehicle andrecord it on company's books and
your company can basicallycarry an asset, a vehicle, on
the books, but again, only forthe business usage percentage.
It is absolutely allowed by theIRS as long as you keep track
of what you use the car for,keep track of your business
mileage.
So IRS says look, if you wantto deduct your car for the
(09:41):
business, that's not a problem,we will allow you because that's
how the tax code is written.
But you've got to stay incompliance.
You've got to make sure youhave a documentation of how many
miles you used.
What did you use the vehiclefor?
For the business?
And guess what?
All of the usage of the vehicle, of your personal vehicle for
your business will be taxdeductible.
(10:01):
Now we're going to talk aboutwhat is it that your accountant
can do to help you better takeadvantage of this tax strategy?
First of all, if you do notknow what account plan means,
speak to your accountant, andyour accountant is probably not
doing it, so just drop them.
Get a tax advice.
That's my advice.
But what you need to do is makesure, if you love your
accountant, if your accountantis your uncle or your aunt right
(10:23):
, you're like I'm not leavingthem again.
Okay, no problem, tell them hey, I want to implement an account
plan so I can properlyreimburse myself for the use of
the vehicle.
Now, remember what I told you.
Okay, if your car is being usedless than 70% for the business,
you really need to figure outand make sure your accountant
can do some calculations.
(10:44):
Should you do the actualexpense reimbursement or mileage
expense reimbursement If it'sover 70%?
What we do and your accountantcan do this also is bypass the
account for a plan, record thecompany vehicle on company's
books, even though you paid forthe car personally.
I get this question a lot.
Well, boris, how do I pay forthis car if it's going to be
(11:05):
under my personal name?
The truth is, it's best to paypersonally, because then this
vehicle can be recorded oncompany's books as an owner
contribution.
You, the owner, contributedthis asset to your S corporation
and whatever that businesspercentage is that you use, and
remember you've got to have adocumentation of how much you
use the vehicle for the business.
Then you can record it.
(11:26):
You can take depreciationexpenses for the business usage
of the vehicle gas expenses,maintenance, insurance, finance
charges, lease charges, whateverthat may be.
All of this will be taxdeductible for you in your
business.
Two things again.
Let's kind of review Eitherimplement an account plan or, if
(11:48):
you're really using the vehiclemajority for the business in
our case, for our firm, thatrule of thumb is about 70% then
we put the vehicle as a businessasset under the S-corporation.
Now I just want to say thankyou so much and until the next
time.
Speaker 2 (12:04):
That's it for today's episode.
Be sure to check out thedescription below for some free
tax reduction resources thatBoris put together for you.
If you're ready to work with atax advisor on your tax planning
, be sure to schedule your callby heading over to
wwwtaxplanningcallcom.
That's wwwtaxplanningcallcom.
And be sure to subscribe to ourpodcast to be notified when the
(12:25):
next strategy is released.
If you use your personal car in your business,
especially in your S-Corporation, well, guess what?
Irs allows you to claim thatvehicle as a tax write-off
against your business income,even though the car is under
your personal name.
Now, a lot of accountants don'treally know how to do this
properly and they disallow anddo not let their clients that
(00:24):
are profitable business ownersto take this deduction.
They say, no, the car is underthe personal name.
I'm not really sure how we'regoing to take this deduction and
you're not allowed to.
I'm going to show you exactlyhow to use this tax strategy,
even if you're using yourpersonal car for your business,
your S corporation, and at theend I'm going to give you a tax
strategy that you can literallyjust take it to your account and
(00:47):
be like, hey, this is how youdo it and let's take this tax
deduction.
Ready, let's get started.
Speaker 2 (00:53):
Welcome to the tax reduction podcast for
money-making entrepreneurs withBoris Mushaev.
Boris has helped entrepreneursacross the United States
collectively save millions ofdollars in taxes with the power
of tax planning and advisory.
The only way you, the businessowner, can save money on taxes
is by using proactive taxstrategies, and this podcast is
(01:14):
all about saving you money ontaxes.
Boris will share with youin-depth and easy to understand
tax reduction strategies thatyou can implement in your
business within 30 days or less.
Let's jump into today's episode.
Speaker 1 (01:27):
All right, perfect.
So we're going to talk abouthow can you write off your
personal car that you use thatis, under your personal name
against your S corporation.
Before we continue how you cando that, we really need to
understand what is anaccountable plan, because an
accountable plan is somethingthat is allowed by the IRS.
It's a mechanism that you canuse to reimburse yourself
(01:51):
personally from the business forthe use of your car, including
other expenses that you incurpersonally but for the sake of
the business.
Now, accountable plan is apiece of document that is not
filed anywhere with the IRS oryour tax return.
An accountable plan isbasically just a document that
is filed with your files and,based on the accountable plan,
(02:13):
it says that the business, yourS corporation can reimburse you
the business owner, who alsohappens to be an employee of the
business for any expensespersonal expenses that you
incurred on behalf of thebusiness.
Now, when you have a personalcar that you use for the
business, you obviously incur alot of expenses.
(02:35):
You've got gas that you pay for, maintenance, repairs,
insurance, interest if yourvehicle is financed, or lease
payments.
So whatever the business usagepercentage is of your business,
you can every month reimburseyourself.
Literally, you just write out acheck from the business and you
(02:56):
get that as a business taxdeduction and it goes to your
personal account completelytax-free.
That is an accountable plan.
This is one of the main waysthat you as a business owner can
actually write off a personalvehicle that you're using for
the business.
Because when you try to put thepersonal vehicle, the title of
(03:16):
the vehicle, under the business,it gets expensive, especially
with insurance.
So a lot of business ownersthey don't want to do that.
They're using their vehiclemaybe 20%, 50% or even 70% of
the time for their business andthey want an easy way out.
Just paying for these expensesdirectly from the S-corporation
won't be a deduction for you,but if you use an accountable
(03:38):
plan in which you reimburseyourself for the business usage
of that vehicle, that becomes atax deduction.
Now I'll tell you a little bitabout how we handle things in
our firm, our tax advisory firm.
For our clients Majority ofclients that use their personal
car for the business less than70% business use we use an
(04:01):
accountable plan, no questionabout it.
We track their expenses.
We even calculate thedepreciation to make sure that
we include it all and everymonth the business owner gets a
tax-free check from the businessfor using the car and the
business gets a write-off.
Now it gets a little bit trickywhen you've got a car, a
personal vehicle that you usefor your business.
(04:22):
That is more than 70%.
So in our firm, what we usuallydo we do not use an accountable
plan at this point we basicallyplace the vehicle under the
business, not the title of thevehicle, but basically for tax
purposes.
You can do that.
You can record this vehicle asan asset investment by the
business, even though the ownerbought it.
(04:44):
Now this is where you need yourtax advisor, because your tax
advisor will know exactly how todo that.
And again, when we place itunder the business, we don't
deduct 100% of expenses, butwhat we deduct is whatever the
business usage is.
So let's say the business usesthis vehicle 80% of the time for
the business, then 80% of theexpenses from the business will
(05:04):
be deductible and there's a wayto record it, including that
depreciation.
So it's really, reallyimportant to understand that if
you've got a car that is underyour personal name, you can
absolutely deduct it as abusiness expense.
Now, right after this break,we're going to talk about how
can you claim depreciation onthis personal vehicle in your
(05:27):
business right after this break.
Speaker 2 (05:29):
If you have a tax preparer and you do not have a
tax advisor, the only way youcan save money on taxes is by
using proactive tax planningstrategies that only a tax
advisor can give you.
Boris put together a free PDFfor you, the business owner
Seven tax write-offs everyS-corporation business owner
must know.
In this PDF, you can find seventax strategies that you can
(05:52):
start using in your business toinstantly start saving money on
taxes.
Click on the link in thedescription below for a free
download.
Speaker 1 (06:00):
All right, perfect and welcome back.
Let's talk about how can youclaim depreciation of your
personal car in your business.
Before we talk aboutdepreciation, I want to bring
your attention to two types ofmethods that you can reimburse
yourself, or really I should say, two types of deductibility
methods of your vehicle.
So there's something that'scalled standard mileage
(06:21):
deduction, meaning to say theIRS says look, instead of you
using the actual expenses ofyour business, what you can do
is just reimburse yourself.
Again, using the accountableplan that we spoke about earlier
, reimburse yourself for everybusiness mile that you drive.
So how much is thereimbursement?
67 cents per each mile, okay.
So a hundred miles, that's a$67 reimbursement.
(06:44):
A thousand miles and you can dothe math.
Okay, so the IRS says look,let's keep it simple.
You can reimburse yourself 67cents per mile.
Generally, what we do in ourfirm for our tax advisory
clients, we use the standardbusiness mileage rate given by
the IRS if the business owneruses the personal vehicle less
(07:07):
than 50% for the business.
In most cases and I'm notsaying in all the cases, right,
that's why you have to make sureyou're working with a tax
advisor In most cases thestandard mileage rate of 67
cents per mile works better thanactual expenses.
If the car is being used lessthan 50% for the business and
when you're using the standardmileage rate, there is no
(07:28):
depreciation.
You're not taking any actualexpenses, you're just really
reimbursing yourself for themileage that you use for the
business.
Now the second method areactual expenses, and that is
again where you can use theaccountable plan and reimburse
yourself for actual expenses,including the depreciation.
Now the question really becomeswhen should your accountant
(07:51):
report this vehicle that youbought personally and now using
it for the business?
When should your accountantreally report it under the
business books?
So I'll tell you again what wedo for our clients and we try to
(08:12):
you.
Right now.
You're most likely overpayingin taxes every single year, not
by this much, but by this much.
What you need is a tax advisor.
You need somebody that uses taxplanning strategies, but not
only tax planning strategies,but using those strategies and
properly reporting it on yourtaxes.
Now, in this particularsituation now coming back to
(08:35):
what we do for our clients, ifthe client uses the car less
than 50% for the business, inmost cases we use standard
mileage rate If it's between 50%to 70% of the business.
This is where we kind of dosome analytical.
We basically get someanalytical thinking going and do
some calculations and see, hey,which is the better, the
standard or the actual Over 70%?
(08:58):
That becomes very interestingbecause what happens in most
cases?
Actual expenses are morebeneficial because if the car is
new and it was expensive, thenyou can also use a really nice
depreciation deduction.
Now, again, with an accountplan, you can reimburse yourself
from the business for thatdepreciation or you can
(09:18):
literally take this vehicle andrecord it on company's books and
your company can basicallycarry an asset, a vehicle, on
the books, but again, only forthe business usage percentage.
It is absolutely allowed by theIRS as long as you keep track
of what you use the car for,keep track of your business
mileage.
So IRS says look, if you wantto deduct your car for the
(09:41):
business, that's not a problem,we will allow you because that's
how the tax code is written.
But you've got to stay incompliance.
You've got to make sure youhave a documentation of how many
miles you used.
What did you use the vehiclefor?
For the business?
And guess what?
All of the usage of the vehicle, of your personal vehicle for
your business will be taxdeductible.
(10:01):
Now we're going to talk aboutwhat is it that your accountant
can do to help you better takeadvantage of this tax strategy?
First of all, if you do notknow what account plan means,
speak to your accountant, andyour accountant is probably not
doing it, so just drop them.
Get a tax advice.
That's my advice.
But what you need to do is makesure, if you love your
accountant, if your accountantis your uncle or your aunt right
(10:23):
, you're like I'm not leavingthem again.
Okay, no problem, tell them hey, I want to implement an account
plan so I can properlyreimburse myself for the use of
the vehicle.
Now, remember what I told you.
Okay, if your car is being usedless than 70% for the business,
you really need to figure outand make sure your accountant
can do some calculations.
(10:44):
Should you do the actualexpense reimbursement or mileage
expense reimbursement If it'sover 70%?
What we do and your accountantcan do this also is bypass the
account for a plan, record thecompany vehicle on company's
books, even though you paid forthe car personally.
I get this question a lot.
Well, boris, how do I pay forthis car if it's going to be
(11:05):
under my personal name?
The truth is, it's best to paypersonally, because then this
vehicle can be recorded oncompany's books as an owner
contribution.
You, the owner, contributedthis asset to your S corporation
and whatever that businesspercentage is that you use, and
remember you've got to have adocumentation of how much you
use the vehicle for the business.
Then you can record it.
(11:26):
You can take depreciationexpenses for the business usage
of the vehicle gas expenses,maintenance, insurance, finance
charges, lease charges, whateverthat may be.
All of this will be taxdeductible for you in your
business.
Two things again.
Let's kind of review Eitherimplement an account plan or, if
(11:48):
you're really using the vehiclemajority for the business in
our case, for our firm, thatrule of thumb is about 70% then
we put the vehicle as a businessasset under the S-corporation.
Now I just want to say thankyou so much and until the next
time.
Speaker 2 (12:04):
That's it for today's episode.
Be sure to check out thedescription below for some free
tax reduction resources thatBoris put together for you.
If you're ready to work with atax advisor on your tax planning
, be sure to schedule your callby heading over to
wwwtaxplanningcallcom.
That's wwwtaxplanningcallcom.
And be sure to subscribe to ourpodcast to be notified when the
(12:25):
next strategy is released.
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