Upgraded Automobile

Today TaxMama hears from Tiffany in Virginia, who’s trying… “ I am starting an LLC which is an online store selling automotive upgrades. I will be buying a car ($10,000) and upgrading it with mostly my own inventory ($20,000). My website address will be printed on the car and it will be taken to car shows and such for advertising. What if anything can I write off for the vehicle?
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Dear Tiffany,

Good luck in your new venture. I have seen some auto-related online businesses do really well.

What can you write off on your super-upgraded car? Well, the cost of the printed materials you place on the car can be charged to advertising expense.
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The cost of the entries into car shows? Since you’re doing it for the visibility and publicity – I’d say that’s also advertising expense.

But everything else – the car and the upgrades – you will have to treat that like any other car.

Track ALL the mileage, so you have the total mileage for the year.
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Track the business mileage, so you can compute the business ratio of use. If you use it 100% for business, you’ll be able to deduct everything you spend in the course of the year – fuel, insurance, detailing, car washes, maintenance, etc. Plus depreciation.

However, if you stop at the dry cleaners on the way home, or pick up your children from school, or drop in to 7-11 to grab a drink or…do you see how many innocent ways you can use a business car for personal purposes without giving it a second thought?
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IRS is well aware of that. So, odds are, you probably won’t end up using the car for more than 85% business use – less if this is your only transportation.
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For more information, read IRS Publication 463, starting with Chapter 4 – Transportation.

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

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