Purchase of new S-corp vehicle in October

[deekay19]

Realtor has been using standard mileage rates, but she bought a new car in October. Any tips on how to maximize conversion to actual expenses from standard rate for the first nine months of the year?

[TaxGuyBill]

I'm not quite sure what you are asking. She can still use the Standard Mileage Rate for the old vehicle, or even use the Actual Expenses for the old vehicle. That has no effect on her ability to use either the Standard Mileage Rate or the Actual Expenses for the new vehicle.

Does that help? If not, can you clarify what exactly you are asking?

[TaxGuyBill]

Wait a second, I just caught that you said S-corporation. Does the corporation own the vehicle? If so, that doesn't qualify for the Standard Mileage Rate. If she personally owns it uses it for corporate business, the corporation can reimburse her under an Accountable Plan (either by using the Standard Mileage Rate or by using the Actual Expenses).

[Jiggers]

I agree, if owned by the S-Corporation, limited to actual expenses only.

[ATSMAN]

I have 2 Realtors that are S-Corp shareholders and they own their own high end vehicles. Each uses standard mileage and the Corp reimburses them according to an accountable plan. In my opinion this is the easiest way to deal with businesses that have very few members and the personal car use is relatively high in the business.

[deekay19]

Thanks, TaxGuyBill. I didn't think you could use standard mileage rate on one vehicle and actual expenses on another in the same year.

[TaxGuyBill]

You are welcome. Any restrictions on the Standard Mileage Rate versus the Actual Expenses are on a per-vehicle basis, so different vehicles are allowed to use different methods.

However, are you talking about a corporate-owned vehicle, or a personally owned vehicle that is being reimbursed under an Accountable Plan?

[deekay19]

Thanks again, TaxGuyBill. The car was purchased with a corp check, and the initial paperwork was in her name personally. The car hasn't been titled yet. Any recommendations?

[ATSMAN]

If this new vehicle is owned and registered/titled to the corporation and there is personal non business use of this vehicle, you got another issue to deal with. If the payment was made with a Corp check, then I am assuming they want the corp to own and register it?

[Dude]

I guess this RE enterprise LOVES paperwork. That is the only reason I see to put the cars in the Company name when the very nature of the business lends itself to personal use of the vehicle. I agree with Atsman: Have the individual buy their own vehicle and then reimburse them for its use. Maybe the company feels it has a competitive advantage if the realtor drives a specific type of high end car and therefore feel compelled to have the S corp purchase the car.

[Lion]

Make sure the corporation is upfront with the finance company and with the insurance company that the car is a corporate asset. Rates may be higher. And, make sure employee/shareholder tracks mileage, so the corporation can add her personal use to her W-2 and pay appropriate payroll taxes.

[ATSMAN]

Make sure the corporation is upfront with the finance company and with the insurance company that the car is a corporate asset. Rates may be higher. And, make sure employee/shareholder tracks mileage, so the corporation can add her personal use to her W-2 and pay appropriate payroll taxes.

Lion is correct that the finance/insurance company may have different set of rates or rules for corporate owned assets. Here in MA one of my clients got a shock when he went to refinance his rental that the rates were higher for a residential house owned by S-Corp. Similar mortgage was less when owned by individuals.

The finance/insurance company is going to use the title/registration data to determine rates, rather than what is on the asset list of a tax return.

[TAXNJ]

Realtor has been using standard mileage rates, but she bought a new car in October. Any tips on how to maximize conversion to actual expenses from standard rate for the first nine months of the year?

There are many good reply posts

you should reference THETAXBOOK section 10 “Business Autos” which provides IRS rules, codes and publications for further detail answers on clients’ questions.

Also, https://www.irs.gov/taxtopics/tc510