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Should my car be on my business name?

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ladyG

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Apr 18, 2018, 9:31:11 PM4/18/18
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I am a small business person.

To be able to get depreciation on my business tax return for my car, does the IRS require that the car have been bought in the name of the business?

And should the auto insurance on the car be in the business name too?

Anything else that I should do as a small business owner with respect to the car?

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Stan Brown

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Apr 22, 2018, 11:45:44 AM4/22/18
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On Wed, 18 Apr 2018 21:28:11 EDT, ladyG wrote:
>
> I am a small business person.
>
> To be able to get depreciation on my business tax return for my
> car, does the IRS require that the car have been bought in the name
> of the business?
>
> And should the auto insurance on the car be in the business name
> too?
>
> Anything else that I should do as a small business owner with
> respect to the car?

I haven't seen any answers to this yet, so I'll pitch in.

You didn't mention what is probably a key point: how is the business
organized? Is it a sole proprietorship, a corporation (and what
kind), a partnership (and what kind)?

You should look at
https://www.irs.gov/pub/irs-pdf/p334.pdf
(Tax Guide for Small Business), which I easily found by searching
"business use of personal car" (without quotes) at www.irs.gov.

At a quick perusal, I saw no requirement to put the car or the
insurance in the name of the business. I'm sure there was no such
requirement for all the years I operated a sole proprietorship.

You do need to keep meticulous records, to document business versus
personal use of the car. Since you have to keep the records anyway,
you might think about just using the standard mileage rate (53.5
cents a mile, in 2017). That's much easier than figuring depreciation
and allocating that as well as insurance and other costs. Plus, you
don't have to worry about recapture of depreciation when you sell or
trade in the car.

--
Stan Brown, Oak Road Systems, Tompkins County, New York, USA
http://BrownMath.com/
http://OakRoadSystems.com/
Shikata ga nai...

lotax

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Apr 22, 2018, 9:01:20 PM4/22/18
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Hey, Stan, you might want to reconsider "Plus, you don't have to worry about recapture of depreciation when you sell or trade in the car."

IIRC, 23 cents per mile was the adjustment (reduction) to the car's tax basis for each mile of business use claimed with the standard mileage rate, which would certainly be subject to depreciation recapture, *and also* effective 01-01-18 there's no more "tax-free" trade-in of the old business car for a new one.

Stan Brown

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Apr 25, 2018, 11:43:29 PM4/25/18
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On Sun, 22 Apr 2018 20:58:53 EDT, lotax wrote:
> Hey, Stan, you might want to reconsider "Plus, you don't have to
> worry about recapture of depreciation when you sell or trade in the
> car."


Are you sure about that? If you deducted the car (or the business
portion of it) under section 179, sure. But depreciation happens
while you own it, and if you later sell it the past depreciation
doesn't un-happen. You get less money for the car than you would if
it was newer, and the "less money"--the depreciation--is allocated
between business and personal use.

Can you give me a citation? I didn't read Pub 334 cover to cover, but
in a quick perusal I didn't find any indication that any part of the
standard mileage rate was subject to recapture.

--
Stan Brown, Oak Road Systems, Tompkins County, New York, USA
http://BrownMath.com/
http://OakRoadSystems.com/
Shikata ga nai...

Alan

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Apr 26, 2018, 12:18:32 AM4/26/18
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On 4/25/18 8:42 PM, Stan Brown wrote:
> On Sun, 22 Apr 2018 20:58:53 EDT, lotax wrote:
>> Hey, Stan, you might want to reconsider "Plus, you don't have to
>> worry about recapture of depreciation when you sell or trade in the
>> car."
>
>
> Are you sure about that? If you deducted the car (or the business
> portion of it) under section 179, sure. But depreciation happens
> while you own it, and if you later sell it the past depreciation
> doesn't un-happen. You get less money for the car than you would if
> it was newer, and the "less money"--the depreciation--is allocated
> between business and personal use.
>
> Can you give me a citation? I didn't read Pub 334 cover to cover, but
> in a quick perusal I didn't find any indication that any part of the
> standard mileage rate was subject to recapture.
>
Look at Pub 463 page 24. It also shows you the table that contains the
standard mileage rate for depreciation by year since 2000.

lotax

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Apr 26, 2018, 1:20:17 PM4/26/18
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"> > Can you give me a citation?" Asks Stan.

See the first paragraph of "Disposition of a Car" on Page 24 at this cite: https://www.irs.gov/pub/irs-pdf/p463.pdf

Thanks, Alan.

Stan Brown

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Apr 29, 2018, 7:46:44 PM4/29/18
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On Thu, 26 Apr 2018 00:15:21 EDT, Alan wrote:
>
> On 4/25/18 8:42 PM, Stan Brown wrote:
> > On Sun, 22 Apr 2018 20:58:53 EDT, lotax wrote:
> >> Hey, Stan, you might want to reconsider "Plus, you don't have to
> >> worry about recapture of depreciation when you sell or trade in the
> >> car."
> >
> > Can you give me a citation? I didn't read Pub 334 cover to cover,
> > but in a quick perusal I didn't find any indication that any part
> > of the standard mileage rate was subject to recapture.
> >
> Look at Pub 463 page 24. It also shows you the table that contains the
> standard mileage rate for depreciation by year since 2000.

Thanks, Alan. Your point is well taken, and I read that page the
same way you do. So I've learned something. Probably there was a
reference from Pub 334 to Pub 463 that I missed.

--
Stan Brown, Oak Road Systems, Tompkins County, New York, USA
http://BrownMath.com/
http://OakRoadSystems.com/
Shikata ga nai...

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