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Having an Automobile in Your Company

Published by Summit Marketing Team on 06 Sep 2023

Dave Danic, Director of Tax at Summit Virtual CFO by Anders, has an update on placing an automobile in your company. 




Hello, my name is Dave Danic, and I am the Director of Tax Services at Summit Virtual CFO by Anders, and today we are going to discuss having an automobile in your company.

It is a very frequent question we receive, and the short answer is yes, you can. We only recommend that you do it the right way. So the first rule that we want you to follow is actually have the auto titled in your company, and also you can run your expenses such as repairs, insurance, fuel, and those typical expenses through the company. It's a very easy one to miss, but we've seen court case after court case show that if you don't follow the rules, they disallow the deduction.

So, the benefits are very clear. If you are using the auto in your business, then you can first depreciate the auto.

If the auto is over 6,000 pounds, think like a SUV, like a Ford Explorer or a pickup truck or a work van, then those qualify for accelerated depreciation.

That's where you get that one time tax deduction calculated on the cost of the vehicle that helps you out in the first year that it's placed in service. The other issues that we want you to be aware of is that the business needs to use the vehicle more than 50%.

We have to have you track your mileage, track your mileage, track your mileage, because that's what helps determine if the vehicle is used over 50% of the time for business purposes.

Okay. Lastly, if the company allows an owner or an employee to use the vehicle for personal purposes, then the company needs to adjust that employee's or shareholder's W2 to account for that personal use of the company's automobile. 

This is in addition to their compensation because they're getting the benefit of using this automobile. So all in all, yes, you can put an auto in the company, but we ask that you track your mileage to determine the business use percentage, and then we'll also be tracking mileage to ensure that any employees or shareholders are properly compensated for their use of the vehicle. It's a great benefit, and we just recommend that you do it the right way if you place an auto in your company. 



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