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Standard Mileage vs Actual Expenses
When writing off the use of your vehicle for the business, there are two methods: Standard Mileage or Actual Expenses. Either way, you MUST track your miles.
Standard Mileage: The IRS provides a standard mileage rate each year for simple vehicle reimbursement. Each month, a journal entry should be made in your business books for the number of miles driven for the business. The value of this entry will vary based on the IRS. (ex. 2020 $7.5 cents, 2021 56 cents, 2022 58.5 cents)
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Can I write off my new car? (Sec. 179)
It depends! If the vehicle is considered “special use” and is owned and operated for business purposes 100% of the time, yes. The purchase price is deductible based on the Bonus Depreciation rules.
If it is a personal vehicle used 50% or more by the business, a form of bonus deprecation with certain limitations can be used. A Tax professional will need to review the situation.
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Should I buy or lease a car for my business?
When you purchase a vehicle, you can only write off operating expenses. The purchase price is your basis in the asset, and business assets can be depreciated. If you lease a vehicle, the business can reimburse you for a portion of the lease payment based on the percentage of business use.
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Can I write off a boat or RV for my business?
Anything that is reasonably ordinary and necessary for your business to operate can be an expense; however, the IRS no longer allows entertainment as an expense. If the boat or recreational vehicle is used for a meeting space, transportation, or required for usual business operations, the specific expenses related to that instance can be deducted. General maintenance, storage, and leisure operations are not qualified business expenses.