Greetings from the Hemet Car Guy,
It’s tax time, and that means that VIP Autos is seeing a spike in sales from people getting their tax refunds. We know for families out there, a vehicle purchase is an expense item that requires a lot of thought and that’s why we have a no hassle policy; we make sure we give our guests a lot of information so they can make an educated decision, both in terms of the initial investment and the cost of ongoing maintenance.
As I met with my tax planner, he told me there are valid ways to offset these expenses using tax deductions. Many people can qualify for one or more personal, small business, self-employed or business deductions. Some of this was new information to me.
VIP Autos has donated some vehicles to churches and non-profits like Cops Kids and Communities. We are not boasting, just wanted to let you know that you can also take advantage of this tax benefit. Let’s say your old car isn’t going to make it much longer, and the cost of repair isn’t worth the investment. Consider donating it to charity rather than trying to make a little money selling it used. You’ll save the hassle of putting up an ad and dealing with potential buyers who want to talk you down from your price. And if you know your car isn’t worth a whole lot, you may be better off donating it, which will give you a deduction for the market value of the car.
Many charitable organizations will even pick up your donated car for you. This method of tax deduction can apply to personal or business applications; just make sure you get an official receipt from the charity, which should include the value of the vehicle you donated.
I asked about hybrids; unfortunately, I’m told the tax credit program on hybrid car purchases phased out after January 1, 2011. Businesses might be eligible for some tax deductions if your business fleet is stocked with hybrid vehicles. Although hybrid vehicles can be fairly expensive, the offset from a tax deduction, plus the money you’ll save in fuel, can put you ahead.
Deduct business use
The cost of business use on your personal vehicle is deductible. This is the best method for those who work under a sole proprietorship rather than as a legal business structure such as a corporation. The key here is to separate business use from personal use, which can be done through such tracking mechanisms as a written log, or entering data into a smartphone app or computer program.
Small business fleet deductions
A vehicle used exclusively for your small business can add to your yearly tax deductions as part of your operating expenses. While the cost of overhauling a business vehicle doesn’t qualify as a deduction (overhauling must be included in capitalization cost and calculated in the depreciation cost), the cost of repair can be deducted. Keep clear records of repairs, because just claiming an estimated cost won’t go over well with the IRS.
Unreimbursed business expenses
If you’re employed by a company and have used your own personal vehicle for business-related purposes, you can claim those expenses on your tax deduction if your company has not reimbursed you. These expenses could include fuel costs and maintenance, and are usually best calculated by using a per-mile cost, which the IRS updates on a regular basis. As with self-employed tax deductions, the key is to keep clear records and differentiate between business use and personal use. Again the phone app is perfect.
The final word
Unless you’re using your car exclusively for your business, you can’t deduct the full cost of purchasing, maintaining and repairing it. You can and should, however, deduct what you can. The key, as with almost any issue dealing with the IRS, is having clear records to support your claims. I must say that is so true, every year I tell myself I’m going to do a better job with tracking receipts etc…however it’s the law of diminishing intent.
Hope this helps
The Hemet Car Guy