If your business vehicle is used strictly for businesses purposes you may be able to deduct the vehicle. However, business insurance taxes may apply. These insurance taxes may also fall at a higher rate. If you do choose to use a business vehicle, decide who will be the main driver(s) ahead of time. It’s useful to let the employees access a business vehicle for resourceful time and management purposes. However, insurance rates will increase when you add an additional party.
If you drive your personal vehicle for business reasons you may be eligible for a deduction on your taxes. As of Jan. 1, 2016, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be: 54 cents per mile for business miles driven, down from 57.5 cents for 2015. 19 cents per mile driven for medical or moving purposes, down from 23 cents for 2015.
Make sure to keep track of the mileage in order to receive a discount. If you do choose to use a personal vehicle for work, it will not be represented in the financial statement or the assets of the business. Since the vehicle is owned by you and not the business, it will not be an asset of the business. The personal vehicle will be your own separate responsibility.
There are two options for deducting vehicle expenses: the per diem rate or the expenses sustained. To find out more regarding the two options speak to your personal accountant or visit the IRS website. To read more details and options for tax deductions, visit TurboTax's handy breakdown here.
The Bean Counters Bookkeeping Team hold accounting degrees and can help you identify the correct classifications for vehicle use in business. If you need help keeping on top of your books, we'd love to help you grow!