Posted: 6/10/2026 11:18:50 PM EDT
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After 15 years, I have re-joined the ranks of the self-employed. (IT Consultant) Back in the day, I claimed a vehicle expense deduction. It was a pain to track business use versus personal use. I've now purchased a vehicle solely for business use. So I know have a couple of questions... 1) I am operating under the idea that every dime I spent, will be spending on this car is fully deductible. Correct? 2) If I return to "working for the man" at some future point, what is involved in converting this car to personal use? Any other feedback about this is welcome. |
Tom Sawyer.
"If The Rules brought us to this, what use are they?"
"If The Rules brought us to this, what use are they?"
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Originally Posted By tortilla-flats: After 15 years, I have re-joined the ranks of the self-employed. (IT Consultant) Back in the day, I claimed a vehicle expense deduction. It was a pain to track business use versus personal use. I've now purchased a vehicle solely for business use. So I know have a couple of questions... 1) I am operating under the idea that every dime I spent, will be spending on this car is fully deductible. Correct? 2) If I return to "working for the man" at some future point, what is involved in converting this car to personal use? Any other feedback about this is welcome. |
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Originally Posted By crazyelece: You may want to look into keeping it a personal asset, and lease it to the "company" instead |
Tom Sawyer.
"If The Rules brought us to this, what use are they?"
"If The Rules brought us to this, what use are they?"
You really should discuss with your accountant. Preferably before the purchase  There are a lot of ways to make this work for you, but if it is a “business’ vehicle you have to keep a log of trips and note any personal use. At the end of the year, it better be >51% business use or all the deductions go out the window and you are back to the standard mileage rate. The best part is if this happens after you have started to depreciate it as a business expense, you may have to give that back. If you are seriously thinking of getting a W2 job again in less than 5 years, I’d just use the mileage rate, currently $0.725 per mile in 2026. |
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Originally Posted By bsbg: You really should discuss with your accountant. Preferably before the purchase There are a lot of ways to make this work for you, but if it is a "business' vehicle you have to keep a log of trips and note any personal use. At the end of the year, it better be >51% business use or all the deductions go out the window and you are back to the standard mileage rate. The best part is if this happens after you have started to depreciate it as a business expense, you may have to give that back. If you are seriously thinking of getting a W2 job again in less than 5 years, I'd just use the mileage rate, currently $0.725 per mile in 2026. |
Tom Sawyer.
"If The Rules brought us to this, what use are they?"
"If The Rules brought us to this, what use are they?"
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I would do a quick comparison of the estimated deduction using the standard mileage deduction vs depreciation plus actual operating costs such as fuel, tires, maintenance etc. If you go back to a regular job, I don’t think you have to make any conversion etc. You will simply stop taking the deductions on your schedule C. |
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As I'm understanding it, the purchase price of the car has to be depreciated. Depending on how that is actually done and when I convert it to personal use, I could end up owing some or all of the deduction back. I'll probably go with the standard mileage deduction. Simplifies conversion, if that happens, and I'm still going to have to maintain a travel log anyway. [shrug] |
Tom Sawyer.
"If The Rules brought us to this, what use are they?"
"If The Rules brought us to this, what use are they?"
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Look into bonus depreciation. That lets you depreciate things faster than normal, sometimes 100% in the first year. The money maker with bonus depreciation is to take the depreciation deduction when it is most beneficial to you (ie. A higher income year). If you sell it for more than the undepreciated value the difference is income and thus taxed. Ie. You buy it for $10k, depreciate $7k of the cost, then sell it for $5k so $2k of the sale counts as income (you sold it for $5k but the remaining value was $3k). Similarly, if it is 100% depreciated then the entire sales price is taxable income. |
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Originally Posted By tortilla-flats: Hmm. Is that something I can do as a sole propietor? Or would I need to form as an LLC or S Corp? I'm not sure on the specifics, I just know a few small business owners (both single entity and family owned) that operate that way with large assets like vehicles, property, etc. Just something to consider, may want to get specifics from a local lawyer and/or CPA |
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Originally Posted By Morgan321: Look into bonus depreciation. That lets you depreciate things faster than normal, sometimes 100% in the first year. The money maker with bonus depreciation is to take the depreciation deduction when it is most beneficial to you (ie. A higher income year). If you sell it for more than the undepreciated value the difference is income and thus taxed. Ie. You buy it for $10k, depreciate $7k of the cost, then sell it for $5k so $2k of the sale counts as income (you sold it for $5k but the remaining value was $3k). Similarly, if it is 100% depreciated then the entire sales price is taxable income. |
Tom Sawyer.
"If The Rules brought us to this, what use are they?"
"If The Rules brought us to this, what use are they?"
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Originally Posted By tortilla-flats: Yeah I think the bonus depreciation is what will get me jammed up if I need to convert it back to personal use. I’m not sure what is so confusing about this? If you have $10k, buy a car with it, then depreciate it fully so your basis is $0 you have taken a $10k tax deduction. If you sell the car for $4k and pay taxes on that $4k then you paid taxes on $4k of income after deducting $10k from you taxes. In other words you avoided paying taxes on $6k of income. There’s a reason every business under the sun deducts everything possible. |
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I can track the way you describe that now, thanks. I'm still hung up on the log shit, tho. If it's use is 100% business, I don't see the need to keep daily logs of use. (I do have another car for personal use). |
Tom Sawyer.
"If The Rules brought us to this, what use are they?"
"If The Rules brought us to this, what use are they?"
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Originally Posted By tortilla-flats: I can track the way you describe that now, thanks. I'm still hung up on the log shit, tho. If it's use is 100% business, I don't see the need to keep daily logs of use. (I do have another car for personal use). It’s an IRS requirement for sole proprietors, single LLCs, etc. There’s a section that asks if you keep a log and if you have another vehicle available. Fraud is rampant in the eyes of the IRS in these situations. |
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Originally Posted By tortilla-flats: I'm still hung up on the log shit, tho. If its use is 100% business, I don't see the need to keep daily logs of use. (I do have another car for personal use). You see people everywhere in trucks with company logos doing things clearly not work. A lot of the time they are deducting vehicles expenses while using the vehicle for personal use. That’s illegal and a fast-track to an audit if your business doesn’t justify the vehicle expenses. Run a lawn care company? Multiple trucks and tons of mileage on them is to be expected. Run a home day care? 20k miles per year of vehicle expenses will invite suspicion. A log is as simple as a hardbound notebook in the vehicle and you simply write the date, start/end mileage, and purpose for each time the car is used for work. |