When the end of the year rolls around, it’s time to start looking at your inventory—including your current vehicles. If any of your cars, vans, trucks, or SUVs could be claimed for a tax deduction, now is the time to find out! Here’s what you need to know about how to do this.
As a general rule, if you experience any losses on your business vehicles, they can be claimed as ordinary tax deductions. These are some tips you can use to find some additional deductions for your year:
Dispose of your old business car.
If you have an old business car that is being used by a family member, you should consider selling the car to someone else before the end of the year. That old vehicle could be considered a tax-deductible loss, but the more time that has elapsed since you last used it for business, the less valuable that deduction will be.
Try the buy-and-sell method.
If you sell the business car you are currently using, it doesn’t affect your self-employment taxes one bit. By the same token, if you replace your current vehicle by buying a new one, it means that you can claim that as a Section 179 expensing deduction. In other words, the buy-and-sell strategy is a smart one.
Don’t forget your past vehicle trade-ins’ value.
Previously, when you traded in your current business vehicle for a new one, the old vehicle’s value was added to the new one. This isn’t the case under the updated tax law, but you can still take advantage of the value of your past vehicle trade-ins as long as the sales took place by the end of 2017.
Use your personal vehicle as your business vehicle.
Are you driving your own vehicle? If you decide to convert your personal vehicle into your business vehicle before the end of the year, you could claim it as a bonus-depreciation tax deduction.
The Royce CPA Firm is proud to offer accounting and tax preparation services to individuals, businesses, and nonprofits in the Tucson area. If you’d like to learn more, use our online form to schedule an appointment today!