When you’re a small business owner, every penny matters. So, when something goes wrong with your business vehicle, it’s important to know if the repairs are tax deductible.
Unfortunately, the answer isn’t always clear cut. In this blog post, we’ll take a look at “Are Car Repairs Tax Deductible For Small Businesses?”
Are Car Repairs Tax Deductible for Small Businesses?
Yes. Car repairs can be tax deductible for small business.
According to the IRS, “If you use your Vehicle only for business, you may deduct all of the operating expenses. If you use it for both business and personal purposes, you generally may deduct only the business-use portion.”
This means that if you primarily use your car for business purposes, you can deduct most or all of the costs of repairing it.
However, if you use your Vehicle for both business and personal purposes, you can only deduct the portion of the repair costs that were incurred for business use.
For example, if you had to replace your car’s tires because they were worn down from driving to and from clients’ homes, you could deduct the entire cost of the tires as a business expense.
But if you also used your Vehicle for personal purposes as well as for business, you would only be able to deduct a portion of the cost.
When claiming vehicle repair costs as a business deduction, it’s important to keep detailed records of when and why the repairs were made.
The IRS may require you to provide documentation in order to take the deduction.
Car repairs can be a substantial expense for small businesses, but by careful record-keeping, they can also be a valuable tax deduction.
How to Claim Vehicle Repairs as a Business expense
In order to claim car repairs as business expense, make sure you keep track of your expense throughout the year and deduct the total yearly total as an expense on your tax return.
If you are a sole proprietor you can deduct these expenses on your Schedule C that you file along with your tax return Form 1040.
If you are S Corporation, you will deduct this on form 1120S.
General Partnership owners will claim this on form 1065 as an expense
C Corp owners will deduct this on the form 1120.
What is the difference between personal and business use of a vehicle?
When it comes to vehicles, there is a big distinction between personal and business use. Car repairs and maintenance are considered business expenses if the vehicle is used primarily for business purposes.
This means that things like oil changes, new tires, and even accidents can be written off as business expenses. However, if a vehicle is used primarily for personal use, then these same expenses are not tax deductible.
The main exception to this rule is if a person uses their vehicle for both personal and business purposes. In this case, the individual can only deduct the percentage of expenses that relate to business use.
For example, if a person drives their car 100 miles in a week and 50 of those miles are for business purposes, they can deduct half of the total expense of operating the car that week.
Whether you’re using your vehicle for personal or business reasons, it’s important to keep track of your mileage and expenses in order to take advantage of any potential tax deductions.
Examples of Vehicle Repairs that can be claimed as a Business Expense
As a business owner, you can claim a number of different car repairs as business expenses on your taxes. For example, if you use your car for business purposes, you can deduct the cost of repairs that are necessary to keep the car running.
Here are some example of vehicle repairs that you can claim on your business tax return.
- Oil changes
- New tires.
- New brakes
- Air Filters
- Windshield Wipers and Fluid
- Battery Replacement
- Coolant System Services
- Tire and Wheel Balance and Rotation
- Scheduled Maintenance
By claiming these costs as business expenses, you can save money on your taxes.
Tips for tracking car expenses throughout the year
Any business car owner knows that there are a lot of expenses that come with owning a vehicle.
From gas and oil changes to repairs and insurance, it can be difficult to keep track of all the expenses throughout the year. However, there are a few simple tips that can help make tracking car expenses a little easier.
First, create a dedicated folder or spreadsheet where all car-related receipts and invoices can be stored. This will make it easy to see how much you’re spending on gas, repairs, and other car-related costs over the course of the year.
If you prefer you can use one credit card just for vehicle expenses and then use that at the end of the year to separate out your fuel, repairs and other vehicle expenses.
Additionally, be sure to keep track of any business-related expenses, as these may be tax-deductible.
By following these simple tips, you can better keep track of your car expenses throughout the year.
What to do if you’re Audited by the IRS
Most people dread the thought of being audited by the IRS. However, there are a few things you can do to make the process go more smoothly. First, make sure you have all of your documentation in order.
This includes Repair Receipts, Credit Card Statements, Bank Statements, and any other records that will show how much money you’ve spend.
Second, be prepared to answer questions about your income and expenses. The IRS auditor will want to know if you use your vehicle for business and what percentage of your business travel is work related vs personal use.
They may ask for substantiation that shows that you use your vehicle for business such as mileage logs.
Finally, don’t be afraid to ask for help if you need it. If you’re not sure how to answer a question or if you need more information, ask the auditor for clarification. By following these tips, you can minimize the stress of an IRS audit.
We all know that Car repairs can be a pain, but if you own a small business, they may also be tax deductible helping lower some of the pain.
Here’s how it works: if you use your car for business purposes, you can deduct the cost of repairs and maintenance on your taxes.
This includes both routine expenses like oil changes and unexpected repairs like a new engine.
To qualify for this deduction, you’ll need to keep accurate records of your business-related driving expenses.
So before you get your next oil change, make sure to hang on to your receipts.
Car repairs may not be fun, but at least they can save you some money come tax time.
Now that you read “Are Car Repairs Tax Deductible For Small Businesses?” we recommend continue reading more about tax deductions by reading other articles in our Tax Section.