Today TaxMama hears from Peter in Massachusetts who has this question.
“I am a 100% owner of my S corporation.
I used my car, registered in my name, for my business and commuting. I keep a detailed record of mileage and expense. Can I deduct the vehicle expenses on my 1120S?”
Your situation is pretty common. If your company doesn’t own your car, then it can’t really take the vehicle expenses, can it?
But there is a way around this. Submit expense reports for your mileage to the company. Your company may pay you 48.5 cents per mile.
And if your actual expenses are much higher, then you can use Form 2106, the Employee Business Expense form to report your actual auto expenses and take the depreciation. Just be sure to remember to deduct the reimbursements you received from your S corporation.
Incidentally, as an employee, you won’t be able to deduct the interest expenses on the auto loan. If the interest is high and you need the deduction, transfer title of the car to your S corporation and you eliminate the whole employee business expense thing.
See, this is why you need to be working with a tax professional before you make major purchases.
This could have been set up properly in the first place.
And remember, you can find answers to all kinds of questions about auto expenses and other tax issues, free. Where? Where else? At TaxMama.com[Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.]
- Ask TaxMama :: Where taxes are fun and answers are free
- TaxQuips :: The number ONE free tax podcast online