Vehicles and Your Business
First, we will specifically talk about what to do when starting a new business and assuming you are using your personal vehicle for the business.
Step 1: Write up an action plan on the time allocation that the asset is used for personal use compared to business use. The action plan is critical to allocate the correct costs to both business and personal.
Step 2: Keep a mileage log of trips that you do that are for business and trips that are personal. The mileage log is vital to continue reconciling the action plan in Step 1.
Step 3: Reimburse yourself for the business use of the vehicle. You can refund yourself the cost, including the business portion of Interest on the loan, repairs, tires, oil changes, parking, tolls, gas, etc. Or you can reimburse yourself at the business mileage rate for 2023 of 65.5 cents per mile.
If you have a more established business and you are looking to add a vehicle to your business
Step 1: Establish an action plan to allocate any personal use of the vehicle. Please ensure that all vehicle payments are made from the business bank account for the vehicle.
Step 2: Establish insurance on the vehicle through the business’s name.
Step 3: Add the vehicle to your business’s books. (Allows for the vehicle to be depreciated)
It is essential to consult your accountant about how to deduct your auto, how to establish your action plan, and how to correctly record the purchase.
It is also essential to ensure your vehicle purchase falls within the IRS guidelines of Ordinary and Necessary. What this means is that buying a Bentley to use a business vehicle is not ordinary for a construction