Writing off your vehicles for tax purposes

[JimLewis]

As I understand it there are two basic ways to write off vehicles for a business. 1) The standard mileage rate method and
2) The actual costs method (keeping every damn vehicle expense related receipt you get).

I've heard this several places but confirmed it here;
http://www.smartmoney.com/tax/homefamily/index.cfm?story=roadrules

I have a few problems with this and I was wondering how the rest of you guys (with multiple crews and vehicles) do it.

Obviously It's much simpler to use the mileage method. Plus it's pretty lucritive since it pays like $.32 per mile. And I've been doing it this way except now I read that I really shouldn't be because "You can't use the standard-mileage-rate method if: ......You use two or more vehicles simultaneously in your business activity during the year."

So my only option is to make my employees keep every dang receipt for gas, oil, insurance, tires, mechanical work, etc. ??? This seems like a heck of a lot of work. Plus, my employees sometimes loose receipts. I liked the mileage route because it was simple.

I have heard of one other option that my attorney told me about. And that's to start a seperate business entity that would own the trucks. That entity would lease them to my company. I don't know if this would allow me to use the mileage route or not.

Please tell me how y'all do it. I am not looking forward to keeping track of that many more receipts.

[bruces]

Originally posted by jimlewis
As I understand it there are two basic ways to write off vehicles for a business. 1) The standard mileage rate method and
2) The actual costs method (keeping every damn vehicle expense related receipt you get).

I've heard this several places but confirmed it here;
http://www.smartmoney.com/tax/homefamily/index.cfm?story=roadrules

I have a few problems with this and I was wondering how the rest of you guys (with multiple crews and vehicles) do it.

Obviously It's much simpler to use the mileage method. Plus it's pretty lucritive since it pays like $.32 per mile. And I've been doing it this way except now I read that I really shouldn't be because "You can't use the standard-mileage-rate method if: ......You use two or more vehicles simultaneously in your business activity during the year."

So my only option is to make my employees keep every dang receipt for gas, oil, insurance, tires, mechanical work, etc. ??? This seems like a heck of a lot of work. Plus, my employees sometimes loose receipts. I liked the mileage route because it was simple.

I have heard of one other option that my attorney told me about. And that's to start a seperate business entity that would own the trucks. That entity would lease them to my company. I don't know if this would allow me to use the mileage route or not.

Please tell me how y'all do it. I am not looking forward to keeping track of that many more receipts.

Jim,

Two or more vehicles simultaneously is the kicker. If you are a small operation (like me) and maybe had personal SUV and a business truck you could use the mileage method, assuming you are just using one at a time. In other words, if you tow the trailer with the truck most of the time, but sometimes use the SUV to tow, or go to the bank, or pick up parts, or do estimates, etc. you could use the mileage method for both.

Depending on the cost of the vehicle, if you really look at all of the costs, I believe you might find that the actual cost is more than .32 per mile. As far as keeping track of expenses, for gas, etc. credit cards could be a good method if you can trust your employees with them. For repairs & other items, pay anything you can by check, run accounts with repair shops if possible, to minimize the number of payments that you have to keep track of.

Also, if you are incorporated and use your personal vehicle for business use, you can reimburse yourself for the expenses @ .32 per mile.

[osc]

You can take up to 25k in the year the vehicle is purchased or goes into service so long as it is only used for business. Then you are done with the write off.

Or you can purchase the vehicle and depreciate it over 7 years as long as you only use it for business.

Or you can turn in mileage.

Or you can turn in actual expenses.

Or you can lease and write off the whole payment as well as gas, oil, repairs etc..

When you write off the vehicle itself, you must claim the money as income if you ever sell the vehicle.

[dmk395]

Keep track of both mileage and expenses. At the end of the year simply take whichever one is the largest tax writeoff.

[thelawnguy]

You cannot fully depreciate certain motor vehicles, including ones most commonly used in our industry.

If you use the expense method the first year you cannot change methods as long as you own the vehicle.

Jimlewis based on the replies seen here so far, if I were you I would speak to my accountant regarding this issue. Or try IRS publication 463, http://ftp.fedworld.gov/pub/irs-pdf/p463.pdf or pub 334 http://ftp.fedworld.gov/pub/irs-pdf/p334.pdf

[SprinklerGuy]

also, what do you mean your employees lose receipts? Do they work for you or you for them? My guys turn receipts in on a daily basis, not to mention it is company credit cards so even if they do miss one, I won't when I get the statement. Get on them and make them be more responsible, it is a must.

[scott's turf]

I agree with dmk. If you are really concerned which one is cheaper than do bother and make your decision at the end of the year. Also maybe get a separate charge card that you use only for vehicle expenses and than receits won't be as much of a prob. I use the actual expense of the vehicle because my diesel gets less than 20 miles per gallon and with the cost of diesel at $1.40 that is $0.07/ mile right there. Then you have insurance, damages, repairs, and maintance. It adss up fast plus I personally don't put on tons of mileage each year. If you put over 25k per year it is probably worth doing the mileage. Just my opinion.

[thelawnguy]

My 1995 Dodge goes 8000 +/- business miles per year, and even with the cost of fuel to feed the thirsty 360, oil changes, repairs, etc it has always been to my advantage to take the standard mileage allowance.

[JimLewis]

The point is I don't have a choice! From the way I read it, I am not allowed the standard mileage deduction on our vehicles because we have several of them in use at one time. This is the way I'd like to go but I can't figure out how to do it.

[paul]

Jim is your company a Corporation ?
E-mail me if it is.

[JimLewis]

Email doesn't appear as an option for you, Paul. But the answer is no. Currently we are a sole prop. But I plan on becoming a LLC or something like that very soon.

[scott's turf]

Is the insurance on the truck a vehicle expense? I though it was. If so that is at least $1200/year which is 3750 miles plus repairs, tires. Maybe my opinion is biased considering my f250 blew a trans this year and has been a money pit ever since I got it.

[JimLewis]

Yes, insurance is a tax write off if you DON'T use the standard mileage deduction. You can write it off if you use the actual cost method. See this web page for more on this....

http://www.smartmoney.com/tax/homefamily/index.cfm?story=roadrules

[scott's turf]

So what guys are writing off mileage? It doesn't seem like the way to go unless you have a cheap old truck that doesn't cost you much money to run. If you have a new truck on the other hand you have to put on a lot of miles before you break even. For instance: a $600/month truck payment + insurance will run you around $8200/year. That is 25625 miles at $0.32/mile. That is not even including gas. What are some of you guys putting on your truck for mileage each year. I have a small business and only put on about 10k each year.