Posted Monday, Mar 11, 2019
Greetings from the Hemet Car Guy, in past article we discussed people buying cars for their Uber business. And the difficulty getting the loan approved if Uber or Lyft driving is your only means of income at car dealerships usually their lenders only do personal car loans not commercial/business loans.
Fortunately for us at VIP Autos we have lenders that do auto loans that can be put in the business name as long as the business is established with credit or the business owner or CEO or shareholder can cosign.
Purchasing a car for the business has many tax advantages for the owner, whether that owner is the business or an employee. But before you buy that car, consider the pros and cons of having the company or the employee owning the car.
Only actual business use of the car is deductible as a business expense. Commuting expenses between home and business are not deductible business expenses and personal travel is not deductible. Whoever drives the car must keep good records on business travel expenses in order to have those miles allowed as a deduction.
Many banks do have seasoning requirements for small business loans, which means you can only finance a car if your firm has been in business for at least two years. Provide your lender with at least two years of business tax returns and cash flow statements. You need a positive cash flow to get a loan. Depending on the size of the loan, your lender may also ask for a business plan that details the purpose for buying the car.
Buying a car can benefit the company or the employee who owns a business car with the cost savings from tax deductions. This deduction comes in two parts: the deduction for ownership of the car, and deductions for costs of driving the car for business purposes.
My tax guy says “For the owner, the cost of the car as a business asset and the costs for business use of the car are both fully deductible from business taxes. For the employee, the cost of the car as an asset is not deductible (even for interest expenses on a car loan). The cost of business driving expenses is reported on Schedule A of Form 1040, but these costs are only deductible if they are greater than 2% of adjusted gross income
No doubt, having the business own the car allows more deductions, such as depreciation. Most of these deductions are not available to individual employees on their personal tax returns.
Here is another example our dealership decided to lease a car for business use. And then have the option to resell it at the end of the lease term. However when you think it through, for some businesses you may not have control over how much mileage the employee puts on that car. For example our car lease term has a 12,000 mileage restriction. If you (as the owner) drives a leased car, you may be able to control personal use and keep costs down. Every situation is different, but consider looking at the leasing option but also know it’s not for everyone.
Besides being the Hemet Car guy, I volunteer by serving on the Board of Directors for the Hemet San Jacinto Chamber of Commerce, I see business owners driving to the chamber events promoting their business and this comes to mind. Are you are using your car for business, it does have its advantages.
Disclaimer: I am not a Tax Guy nor do I play one on TV The information in this article is intended to be for general purposes, and is not intended to be used as tax or legal advice. Every business situation is different and federal and state laws are constantly changing. Please consult your tax or legal advisor before taking any action that could affect your business