Jonesville, MI · Member since 2017 · 3 posts · 0 votes
If I lease my car to my scorp, the scorp can write off the lease payment. Can I write off the mileage on my personal taxes? Also can I depreciate that payment.?
Investor · Sykesville, MD · Member since 2016 · 11 posts · 4 votes
9y
Good question. It is true that if you lease your car to your S Corp, the S Corp can write off a portion of the lease payment. However, there is a limitation based on the value of the car and the % used for business. Also, you must report all of the lease income on your personal tax return - potentially subject to self-employment tax. You would deduct depreciation against the rental income...so this might or might not be the best arrangement, for you depending on the numbers.
Or if there is no personal use and it is an expensive pick up truck, maybe transfer title to the S Corp, deduction deprecation on the S Corp return and pay all expenses from the S Corp? That would help with the self-employment tax issue.
You could just write off mileage expense through the S Corp and have the company reimburse you personally for the expenses (except any monthly payment to the bank). This is usually best for an inexpensive small car or a vehicle that was used for a long time prior to starting the business with no lien on it. Especially if you drive a lot, but have a mix of business and personal use.
To estimate the biggest deduction for your circumstances, we need to think about the type of vehicle (this matters when it comes to DEPRECIATION), the cost, when it was purchased, the value when you started using it for business, if you used it in another business (if so, what is its tax basis?), how long do you anticipate keeping it, what will you do with it when you decide to get rid of it, what do you think the operating costs (aside from the monthly payment) will be, how many miles you expect to put on it per year, and what percent will it be used for business vs. personal purposes.
Do you already have the vehicle or are you trying to take taxes into account in your decision to purchase a vehicle? Or something else?
Jonesville, MI · Member since 2017 · 3 posts · 0 votes
9y
I already own the truck and most of my miles are for work, I don't drive much maybe 11000 miles per year. I was wondering if there would be a better way or a way of getting more of an deduction rather than using mileage.
Investor · Sykesville, MD · Member since 2016 · 11 posts · 4 votes
9y
Leasing or transferring the truck are both legal and might get you a bigger deduction than mileage. Just have to run the numbers and consider whether the added administrative efforts are worth it. Sounds like you might have already deducted mileage in previous years? If so, and if you decide to switch to one of these "actual" methods now, the truck's tax basis for depreciation purposes would be reduced by about 20 - 24 cents per mile...the exact amount depends on the year.