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Old 06-30-2017, 02:00 PM
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Purchasing new vehicle for business and personal

Some background: I have worked at a very small sign company for the last 11 years. They have been in business since 1978. Four years ago I started my own small screen printing and graphics LLC on the side, with the intention to take it full-time at some point. My bosses have since decided to retire and I will be purchasing their business and merging it with my own at the end of October 2017. I will be sole proprietor, no employees.

Question is this: I need a pickup truck for my business. I also could use a new personal vehicle. I'm leaning towards getting a new/newer pickup truck to use for both business and personal use. I currently use MileIQ to track my business mileage, but am wondering what the best and easiest option is as far as acquiring a new truck goes. Vehicle will definitely be used more than 50% for business. I thought about leasing, but there's no way I'm going to be able to stay under the mileage allowance if using for both business and personal. I would LOVE to be able to buy a brand new truck, but need to know if the tax benefits will be enough for me to be able to realistically afford it.

Since I'm relatively new to business ownership, I'm still learning all the ins & outs of taxes and whatnot. I've done my own taxes using TurboTax for the past few years, but each year I feel more and more like I'm probably leaving money on the table. This year with the purchase of my employer's business, moving the business, getting set up in the new shop, I'll definitely be using an accountant for my 2017 taxes. Any help regarding my vehicle situation would be greatly appreciated!



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Old 07-03-2017, 04:35 AM
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You can deduct expenses for a vehicle you use for your business. If you use the vehicle for both personal and business purposes, you can deduct only the costs for business use.Business purpose involves driving from your place of employment to another work site, to meet with a client, or going to a business meeting. Commuting from your home to the office doesn't count as a business purpose. However, if you have an office in your home, then traveling from your home office to meet with a client or conduct business is tax-deductible. The deduction for business use of a vehicle is taken on Sch C as you're self-employed;you can choose either std mileage or actual expenses; Instead of tallying up all your actual car expenses, you can use a standard mileage rate to figure your deduction. Using the standard mileage rate , you may multiply the rate by the number of miles driven to determine the dollar amount that can be deducted for car expenses; In addition to your standard mileage deduction, you can also deduct the cost of parking fees and tolls you pay for business. However, you can't deduct the amount you pay for parking at your place of employment. You should also keep a mileage log to track your mileage for the yearIf you use the actual expenses method, deduct the actual expenses of:
Owning your car;Operating your car
You can also deduct depreciation if you own the vehicle. If you lease a vehicle, you can deduct the lease payments related to the business use of your car.



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Old 07-03-2017, 11:25 AM
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Originally Posted by Wnhough View Post
You can deduct expenses for a vehicle you use for your business. If you use the vehicle for both personal and business purposes, you can deduct only the costs for business use.Business purpose involves driving from your place of employment to another work site, to meet with a client, or going to a business meeting. Commuting from your home to the office doesn't count as a business purpose. However, if you have an office in your home, then traveling from your home office to meet with a client or conduct business is tax-deductible. The deduction for business use of a vehicle is taken on Sch C as you're self-employed;you can choose either std mileage or actual expenses; Instead of tallying up all your actual car expenses, you can use a standard mileage rate to figure your deduction. Using the standard mileage rate , you may multiply the rate by the number of miles driven to determine the dollar amount that can be deducted for car expenses; In addition to your standard mileage deduction, you can also deduct the cost of parking fees and tolls you pay for business. However, you can't deduct the amount you pay for parking at your place of employment. You should also keep a mileage log to track your mileage for the yearIf you use the actual expenses method, deduct the actual expenses of:
Owning your car;Operating your car
You can also deduct depreciation if you own the vehicle. If you lease a vehicle, you can deduct the lease payments related to the business use of your car.
Thanks for the reply! I guess maybe I have a little more of an understanding of all this than I let on, because I did already know pretty much all of what you said. What I'm really trying to figure out is what is going to give me the biggest tax benefit since there seem to be a lot of options. Lease vs buy, I buy vs business buy seem to be the biggest variables. I think I've ruled out a lease since there is no way I'm going to stay below 10k miles a year using the vehicle for both business and personal use. So buying--should I buy it or should my business buy it? If I buy it (registered to me), can I still do the section 179 deduction or would it have to be registered to the business? Like I said, I'm already tracking mileage using an app, and I can already see that I will be getting a much larger deduction for 2017 than I did for 2016 using the standard deduction/not tracking actual mileage.

So to reiterate, small business with no employees, estimated annual gross sales of around $200k, pickup truck purchased for business (65% est.) and personal (35% est.) use...what is going to provide me with the biggest tax benefit?



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Old 07-03-2017, 10:53 PM
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Originally Posted by reactiongfx View Post
Thanks for the reply! I guess maybe I have a little more of an understanding of all this than I let on, because I did already know pretty much all of what you said. What I'm really trying to figure out is what is going to give me the biggest tax benefit since there seem to be a lot of options. Lease vs buy, I buy vs business buy seem to be the biggest variables. I think I've ruled out a lease since there is no way I'm going to stay below 10k miles a year using the vehicle for both business and personal use. So buying--should I buy it or should my business buy it? If I buy it (registered to me), can I still do the section 179 deduction or would it have to be registered to the business? Like I said, I'm already tracking mileage using an app, and I can already see that I will be getting a much larger deduction for 2017 than I did for 2016 using the standard deduction/not tracking actual mileage.

So to reiterate, small business with no employees, estimated annual gross sales of around $200k, pickup truck purchased for business (65% est.) and personal (35% est.) use...what is going to provide me with the biggest tax benefit?
Thanks for the reply! I guess maybe I have a little more of an understanding of all this than I let on, because I did already know pretty much all of what you said. What I'm really trying to figure out is what is going to give me the biggest tax benefit since there seem to be a lot of options. Lease vs buy, I buy vs business buy seem to be the biggest variables. I think I've ruled out a lease since there is no way I'm going to stay below 10k miles a year using the vehicle for both business and personal use. So buying--should I buy it or should my business buy it? =====>I get asked all the time about the best way to buy a new work-come-personal vehicle for a business owner. In short, there?s no ?one size fits all? answer. Assuming you?ve got a company setup (i.e. you?re not a sole-owner), there are 2 options. Either buy the car in the business anme, or buy the car in your personal name.In my opinion, I should say it depends; if you use the car for personal use, you cannot deduct the entire expense of the car. One of two things will need to occur. You will need to either deduct only a portion of the expense based on the business use of the car, so if 75% business usage, you only deduct 75% of the auto expenses. Or you can add an amount to income on your W-2 to account for the personal use of company car. This amount would be subject to federal and state income taxes and Social Security and Medicare Taxes. The amount of personal use that should be reported is based on a percentage (the percentage of personal use) of the value of similar leased cars. If you buy it in your personal name, you can either:
Keep a log book all year long and claim mileage from the company at the IRD?s per-determined rates; nobody wants to keep a log book all year long.you need to Keep a log book for three months (much better than for a whole year!) and then put the business portion through the business. You can put all of the vehicle?s running costs through, including depreciation, petrol, maintenance and any interest paid to purchase the car. If you buy it in the business, you can either:Pay what?s called Fringe Benefit Tax (FBT) and claim 100% of the running costs of the car, regardless of whether or not you were using the car for business or personal use. If you?re paying FBT you can claim it. The amount of FBT you pay is based on (1) the value of the car and (2) how much you earn.
Reimburse the business each year for 20% of the cost price of the vehicle. In this situation you?re also entitled to claim 100% of the running cost of the vehicle. The best option for you will depend on:What the car you?re buying is worth;What your annual running costs will be;What your business use of the car is going to be
The lower the business use, the more likely it is you?re better off to pay FBT. Alternatively if it?s a super expensive car you?re probably better off to buy it in your personal name.





If I buy it (registered to me), can I still do the section 179 deduction or would it have to be registered to the business?=====>as said previously it depends; you do not necessarily need to register it to your biz however, If you take a section 179 deduction you cannot use the standard mileage rate to calculate your car expenses. Also, if you claim either a section 179 deduction or use a depreciation method other than straight line in the first year the car is in service, you cannot use the standard mileage rate on that car in any future year.Vehicles used in your businesses qualify - but certain passenger vehicles have a total depreciation deduction limitation of $11,060, while other vehicles that by their nature are not likely to be used more than a minimal amount for personal purposes qualify for full Section 179 deduction , if you have the S-corp set up a reimbursement plan that qualifies as an accountable plan under IRS regulations, and keep records of your actual expenses for the vehicle (as opposed to just mileage), you can be reimbursed by the S-corporation for those expenses, including depreciation and the allowable section 179 deduction - the reimbursement can be based on either standard mileage or actual expenses. The reimbursements then become tax-deductible to the S-corporation. This can be tricky to implement, and could be a problem if you have or intend to hire employees.


Like I said, I'm already tracking mileage using an app, and I can already see that I will be getting a much larger deduction for 2017 than I did for 2016 using the standard deduction/not tracking actual mileage.==>>>As mentioned above

So to reiterate, small business with no employees, estimated annual gross sales of around $200k, pickup truck purchased for business (65% est.) and personal (35% est.) use...what is going to provide me with the biggest tax benefit?====>it deepdns what kind of corp or biz youhave; you have a reg c corp or PTE S CORP OR SMLLC TAXED AS A as or as A c CORP OR ETC.



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