As your business grows and things look better from a cash flow perspective, your business may be expanding. Part of that expansion may be increasing or upgrading your vehicles.
If you want to maximize your deductions one of the key items is to track your mileage, complete with date, miles driven and business purpose. When a vehicle is used for both personal and business purposes, the expenses related to its use must be prorated on miles driven for each purpose. Keep a mileage log – or use any of a dozen or so handy mileage apps. I am using MileIQ and find it simple to use and document my mileage. I pay for all auto related expenses with my business account so I can easily separate business auto expenses from personal auto expenses. Think about all the costs of your vehicles – interest, fuel, repairs, regular maintenance and even washing that vehicle so it looks good when you visit customers.
Keep in mind that the IRS has limits for passenger vehicles that are purchased in excess of certain limits. In 2017, it applies to passenger vehicles over $15,900 and trucks or vans over $17,800.
Any vehicle that fits a “qualified nonpersonal use vehicle” is exempt from these regulations. These vehicles are described as vans and trucks whose design makes them “not likely to be used more than a de minimus amount for personal purposes”
How do you get your vehicle purchase to fall into the “qualified nonpersonal use vehicle” category:
- Purchase a heavy vehicle – exceeding 6000 pounds gross vehicle weight
- Purchase specialized vehicle – examples would include a service truck or delivery van with no passenger space beyond the driver
As stated by the IRS, below are the new limits for listed property in 2017
The projected luxury auto depreciation limits under Code Sec. 280F for passenger automobiles placed in service in 2017 are:
- $3,160 for the first year, the same as for 2016 ($11,160 for 2017, same as for 2016, if bonus depreciation is elected);
- $5,100 for the second tax year, the same as for 2016;
- $3,050 for the third tax year, the same as for 2016; and
- $1,875 for each tax year thereafter, the same as for 2016.
Trucks and vans
The projected maximum depreciation limits under Code Sec. 280F for trucks and vans first placed in service during the 2017 calendar year are:
- $3,560 for 2017, the same as for 2016 ($11,560 for 2017, same as for 2016, if bonus depreciation is elected);
- $5,700 for the second tax year, the same as for 2016;
- $3,450 for the third tax year, up $100 from 2016; and
- $2,075 for each tax year thereafter, same as for 2016.
Any personal use that you track above should be recorded as a compensation on the driver’s W-2. We can help you with that.
One permitted method that an employer can use to value the personal use of an employer-provided automobile is the standard mileage allowance rate, which for 2017 is 53.5 cents-per-mile for business-related travel but only if the vehicle’s FMV does not exceed certain amounts. The maximum FMVs for use of the vehicle cents-per-mile valuation rule in 2017, as projected, will be:
- $15,900 for a passenger automobile (same as for 2016);
- $17,800 for a truck or van, which includes minivans and SUVs built on a truck chassis (up from $17,700 in 2016); and
- $21,100 for a fleet passenger automobile (down from $21,200 for 2016) and $23,300 for a fleet truck or van (up from $23,100 for 2016).
Happy shopping and find that vehicle that will help you do more.
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