While vehicle graphics and wraps are excellent advertising tools that help brand a company fleet with eye-catching graphics and text, many small businesses are hesitant to spring for these features on their vehicles because they don’t know whether they’ll be able to claim tax deduction for vehicle wraps.
Many Small Business Owners Wonder: Are Vehicle(Car) Wraps Tax Deductible Expense?
Well, it depends on the type of vehicle. According to Chapter 11 of IRS Publication 535, vehicle graphics and wraps are probably tax-deductible if they clearly promote the brand and the business on a vehicle associated with it.
This clearly indicates that if your vehicle(s) are company-owned, you can successfully claim the cost of wrapping them in advertisements. Read on to learn more details.
- 1 What is a Vehicle Wraps and Graphics?
- 2 Is the cost of vehicle wraps and graphics tax deductible?
- 3 Vehicle Wrapping Expense: Personal Vehicles vs. Commercial Vehicles
- 4 How are vehicle wrap expenses deducted?
- 5 What auto-graphics qualify for advertising deduction?
- 6 Vehicle Graphics and Wrap Design, Printing, and Installation
- 7 Round-off on commercial vehicle wraps and tax deductions
- 8 Learn More
- 9 Sources
What is a Vehicle Wraps and Graphics?
Vehicle wrapping is the application of a decal or a large vinyl graphic straight onto a vehicle’s entire painted surface or a section of it.
Vehicle wrapping can quickly transform the color and overall appearance of the vehicle, allowing for vibrant, one-of-a-kind, and conspicuous branding. You can go for a matte or gloss finish.
Vehicle wraps promote your company in a variety of ways. Unlike traditional billboards, it serves as a mobile billboard, allowing your brand message to reach multiple customer bases daily by traveling throughout the city.
Vehicle wraps can convey vital information about a company in simple text and images, such as the company name, sticker, contact details, or social media handles. Plus, they are easy to change anytime, allowing context marketing to bring in the right clients or customers.
Wrapping a car is particularly advantageous. While relatively smaller than buses or trailers, cars have a significant presence on the highways when decorated to advertise a business. Furthermore, cars play a larger role in daily transportation than big vehicles.
They can accompany the employee wherever they go, including their homes and the client’s homes, or simply park outside popular neighborhoods to attract the attention of potential customers.
Large vehicles, on the other hand, tend to stick to the highways and rarely stop in neighborhoods. Cars can get into different areas of cities more easily than large vehicles.
Nonetheless, graphics and wraps on all types of vehicles are an intelligent way to use a vehicle’s travels to spread brand awareness to various communities.
Vehicle wrapping is a low-budget project compared to painting and can always be quickly removed to revert to the original look, which is especially important if the car is leased.
Is the cost of vehicle wraps and graphics tax deductible?
If the purpose of Vehicle Wrap is Advertising and Marketing then Decaling or wrapping a fleet with marketing messages is a tax-deductible expense. IRS requires the business expense to be ordinary and necessary for it to be deductible.
Wrapping the vehicle allows small business to advertise their business hence it is an ordinary and necessary expense for the business.
Vehicle Wrapping Expense: Personal Vehicles vs. Commercial Vehicles
Suppose you employ the services of a specialized sign and wrap company to wrap your business car with your business sticker, social media handles, and other contact info; then, according to IRS Publication 535, that’s an advertisement and qualifies as a legitimate tax write-off. You can claim the full cost of wrapping the business car as a tax deduction.
On the other hand, marketing messages on personal vehicles are only eligible for partial tax deductions. You may be able to claim only a portion of the cost, but you cannot record and claim business mileage on these vehicles as advertising expenses.
According to the IRS, simply installing advertisements on personal vehicles doesn’t change the vehicle category to “commercial.” That means you cannot deduct expenses for using this car to get to work or for other personal activities.
You can learn more about the IRS deductions and allowances for personal automobiles by reading Chapter 4 of IRS Article 463 or consulting an experienced tax advisor.
How are vehicle wrap expenses deducted?
You can deduct the cost of advertising on your company vehicles in various ways. You can write off the cost of wrapping your business’s fleet with advertising artwork.
For example, if you spend $800 hiring someone to put your business logo and contact information on your car, you can legally deduct that amount from your taxes. However, you may be required to prove the expense, so always retain the vehicle wrapping project receipt.
You can also record and claim corporate miles used for marketing. But be careful not to overestimate your allowances. Knowing exactly which tax write-offs are permitted will assist you in maximizing your company’s fleet for tax breaks.
Adding advertising to your vehicle does not entitle you to full tax write-offs.
Even if you are inclined to argue that every trip in the car is essentially a business trip because of the advertisement, the tax law won’t agree with you. You can only track and claim business-related use and the resulting expenses.
Personal miles, including using the vehicle to get to work, are not deductible. Back in 2010, a dental practice was sued by the IRS for claiming a 100% tax write-off on a business car expense, including personal use.
The court ruled in favor of the IRS that the business couldn’t simply deduct 100% of its car expenses solely because the vehicle bore promotional messages.
On the other hand, you can deduct a vehicle’s use for business trips and transportation of business materials as an advertising expense. Simply record your corporate mileage to establish what share of your vehicle usage is for business.
Gather your annual vehicle bills, including gas, insurance, depreciation, repair, and maintenance.
Calculate how much you can deduct by multiplying that amount by the share of business use. Alternatively, you can claim standard mileage only, leaving out the actual expenses and simply keeping a mileage log.
An accountant can advise you on the best method to choose. However, if you travel many miles in a cheap, fuel-efficient vehicle, you’ll be OK with the standard mileage method.
On the other hand, if fuel is not the only expense you worry about, then keeping a record of all these other expenses and claiming them too makes sense. As long as it’s legal, you can claim as many tax breaks as possible.
What auto-graphics qualify for advertising deduction?
Vehicle graphics of all kinds, including decals, partial wraps, and full wraps, qualify for tax deductions as long as they clearly promote the brand.
Even simply installing company stickers and contact information on a work vehicle qualifies as an ordinary and reasonable tax-deductible expense.
But you may be required to prove the expense, so always retain the receipt of any vehicle wrapping or graphics project in case you are audited and are required to substantiate your claims.
Work vehicles are vehicles that are bought or leased for work purposes. Automobiles, vans, and trucks are obvious qualifiers. In terms of vehicle wraps, these are the ones that are frequently branded.
However, advertisements can also be placed on company golf carts, airplanes, and motorcycles, which may qualify them for tax deductions because they can be classified as company vehicles.
If you’re unsure whether you qualify for tax deductions on advertising certain business vehicles, don’t be afraid to consult with a business tax accountant.
Vehicle Graphics and Wrap Design, Printing, and Installation
Always work with a skilled and competent vehicle wrap and graphics company for excellent branding. Vehicles are always on the move. They may pose in neighborhoods and parks, but only for a short while. Therefore, you want your advertisement not only to be eye-catching but also to convey as much detail as possible in only a few words and graphics.
Too much text or color can end up leaving people confused. Don’t be afraid to ask the company you are vetting for some of their past jobs to see how they fared. Read the client feedback tool to see if they were satisfied with the job, and then choose a sign and wrap company that you feel will deliver.
Depending on your budget, you can wrap only a portion of the vehicle(s), such as the side doors or the entire painted surface. There are many designs and colors to choose from, so don’t limit your imagination.
Round-off on commercial vehicle wraps and tax deductions
Vehicle wrapping is an excellent way for a small business to make the most of its fleet of vehicles and turn them into promotional machines while claiming the project expenses as tax deductions.
Indeed, the IRS allows businesses to deduct the cost of wrapping or decaling commercial vehicles from their tax liability. Automobiles, vans, and trucks, as well as airplanes, motorcycles, and even golf carts, are all examples of business vehicles you can wrap and claim tax deductions.
You can also record and claim corporate mileage used for advertising. Just remember to keep the receipt in case you need to prove the costs.
However, placing an advertisement on personal vehicles won’t qualify you for a full tax write-off on the expense. You may be able to claim a small portion of the cost but aren’t allowed to claim any tracked and recorded business mileage on the vehicle just because of the advertisement. Personal vehicles are simply not business property.
You can always consult an experienced tax advisor if you have any doubts.