When using a vehicle for business purposes, there are a lot of things to consider. These include taxes, mileage deductions, depreciation expenses and whether to use a personal or business car.
Just like any aspect of your business and personal life, it is important to keep vehicle and other expenses separate. So before you start using a car for your business, address these five issues first.
1. The Driver
The driver is one of the most important things to consider when using a vehicle for business purposes. Will the owners, staff members or both drive the vehicle for business? Business owners obviously have more control over their driving behavior than that of staff members. Letting employees who have a bad driving record drive the business car can significantly affect your insurance rates.
Insurance rates increase when you provide coverage for your employees. You’ll also assume additional liability when you allow employees to drive for business purposes. Be sure your insurer understands the details of your situation so he or she can provide coverage that best suits your business needs.
2. Taxable Business Expenses
If you drive a vehicle for business use, you can deduct expenses you incur to run the car. The expenses must be documented and must be business-related to be deductible.
Common expenses that can be deducted include insurance, lease payments, gas, repairs and maintenance, vehicle registration fees, parking fees, and garage rent.
3. Financial Statements
Financial statements show the value of assets owned by the business. This means that personal cars are not listed as assets. Automobiles that are business assets will have their cost, accumulated depreciation, and any related liability appear on the balance sheet.
4. Leasing vs Buying
The perennial question that many business owners ask when considering a business vehicle is to buy or to lease. There are several advantages to leasing a business vehicle over buying. For example, a lease payment is normally fully deductible as an expense on your business’s financial statement. However, buying or leasing depends on several factors including how much you want to spend on your monthly payments, the number of miles you will be driving each year, how long you want to keep the car and other factors that are specific to your business. Just be sure to take your time to research both options before making a decision.
If you’re considering leasing a vehicle, Intelligent Van Leasing is a great place to start your search. The company offers flexible leases at competitive prices and has a variety of vehicles to suit your business needs.
5. Property Taxes
Property tax, also known as ad valorem tax, is tax imposed on by a local or state tax authority based on the value of a car. It is determined by the property assessor based on the assessed value of the vehicle.
You can deduct property taxes paid during a financial year based on the assessed value. Portions of local benefit taxes that are deductible include maintenance, repairs and interest charges.
Explore these factors in greater depth before you start using an automobile for your business. Also, work with a tax expert to run the numbers before setting policies about the use of vehicles for business purposes.