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?”

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.

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. 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? 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.

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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