If I get a vehicle to use in my business, can I use it for personal use?
Behold the value of being a small business owner.
Your business will pay for things that you use yourself in your daily life that you previously had to pay for out of personal funds.
A vehicle is one of the biggest household expenses for individuals.
Woo-hoo! I get to buy a vehicle and someone else pays for it!
Well, that someone else is still you, but this time you’re going to use proceeds from your business to pay for it.
The business would pay for the car itself. Maybe even a new truck.
Instead of giving yourself a raise and buying a truck with after-tax dollars, have the business buy the truck. The business will deduct the expenses from its taxable income and only pay taxes on the amount of income remaining after the car expense was deducted from total revenue earned.
If the business buys a $30,000 car, you’ve saved payroll taxes on that $30,000! So you don’t have to have higher taxable wages in order to make the truck payment, so you can pay yourself a lower salary and pay even lower personal income tax. Small business owners do this every day.
What’s the catch?
You actually have to be using the vehicle for business use. It can’t buy you a luxury vehicle that is not used in the conduct of the business.
Also, if there is a portion of the vehicle use that is clearly not business related, then you can’t get the tax savings for that usage. Keep a mileage journal. You will need to report the value of the personal use of the vehicle on your personal taxes as income.
And since this is not a tax or legal blog, you should discuss this concept of business vehicle usage with your tax and legal advisors.
Top 5 Benefits for having the business buy the vehicle
1) You’d probably have a company logo or identification of the business on it. Instantly, it’s advertising!
So, not only do you get to drive a vehicle that someone else (your business) is paying for, every time you drive it, more people learn about your business and you make even more sales!
2) If you can pick up your own raw materials in your company truck, you could save on shipping costs and lower your cost of goods. This means you would have less cost in manufacturing your product or service.
If you have a lower cost than your competitors, you could sell your services for less than your competitors and generate even more business! Or you could sell at the same retail price and pocket the savings yourself.
3) If you can do more deliveries because you use your business vehicles, you can make your customers happier than your competitors, and they’ll continue to buy from you.
4) You’ll look better. If you have a nicer, newer business vehicle, your customers may view your business. Molly Maid franchise company leases vehicles for their cleaning staff. Why? Because the representatives of Molly Maid will look better when they pull their car up in front of a home in an exclusive neighborhood, the car has advertising logos on it which promotes calls from other potential customers, and the cleaning staff has a new, reliable vehicle to get to appointments reliably.
5) Dude, it’s a free car! How many more reasons do you need?
What type of car would you buy for your business?