Vehicle as a Business Expense

[Bonedoc1]

What is the best way to run a vehicle through as a business expense? Can I purchase the vehicle with through the business or only write off the mileage that I drive?

I am a partner in a 14 man orthopedic group. Some of my partners run their vehicles through the business as leases (which I don't want to do, I would rather own my vehicle) and others only write off mileage. What is legal and effective?

[DarrVao777]

I think it depends on the car.

If you like expensive cars and swapping them out every few years, you can deduct actual expenses and deduct the lease payments.

If you don't like expensive cars, plan on keeping them for awhile, and put on a fair amount of mileage, writing off mileage might be the way to go.

If you like expensive cars, plan on keeping them for a moderate period of time, I believe you can still deduct the depreciation from the time you purchased the vehicle to the price it eventually sold for.

That's the limited knowledge I have on the topic, hopefully someone else can shed more light

[jhwkr542]

My company provides a lease for everyone in the group. The lease, insurance, gas, and taxes are all paid by the company. The % miles used for personal use is considered income that gets reported to us (e.g. you used the car for business on 10% of the miles. if you used $5000 on gas and lease payment, then $4500 gets added to your w-2 or whatever). Probably a big waste of money but everyone in the group likes new cars and they're used to it.

Disclaimer: I haven't personally run the numbers but this seems to be the most common way I've heard it done, so I'm assuming it's also the most tax-efficient.

[jfoxcpacfp]

Bonedoc#1 wrote:

What is the best way to run a vehicle through as a business expense? Can I purchase the vehicle with through the business or only write off the mileage that I drive?

I am a partner in a 14 man orthopedic group. Some of my partners run their vehicles through the business as leases (which I don’t want to do, I would rather own my vehicle) and others only write off mileage. What is legal and effective?

Click to expand...

If your partners agree with the business purchasing a car for you, then the business can purchase it and your personal use will be taxed as a "Guaranteed Payment". However, you did state that you would rather own your own vehicle and, under this scenario, the business would own the vehicle.

This is a little tricky. Taxes on a guaranteed payment include FICA (down to Medicare for you) and reduce income by a proportionate amount for all partners (if this is what the partnership agreement stipulates). By being reimbursed for mileage under an accountable plan, you will pay no taxes on the reimbursement and the expense will be deductible to the partnership. Of course, if you own the car, that means the $$ to buy it comes out of your pocket!

The "best way" is subjective and depends upon the partnership agreement and what is normal for your business. Both methods you mentioned are legal. As far as "effective", that depends on how you define it for the purposes of your question.

[Kamban]

DarrVao777 wrote:

I think it depends on the car.

If you like expensive cars and swapping them out every few years, you can deduct actual expenses and deduct the lease payments.

If you don’t like expensive cars, plan on keeping them for awhile, and put on a fair amount of mileage, writing off mileage might be the way to go.

If you like expensive cars, plan on keeping them for a moderate period of time, I believe you can still deduct the depreciation from the time you purchased the vehicle to the price it eventually sold for.

That’s the limited knowledge I have on the topic, hopefully someone else can shed more light

Click to expand...

This is what my CPA said a decade ago. But you either have to keep the car strictly for business or keep good records of business and personal driving.

My friend keeps a Mercedes exclusively for business and has a minivan for personal driving. The company is the leasing entity, and all costs are deducted as expenses of the company.

On the other hand I own a Camry Hybrid and tend to keep it for life. Rather than my S corp lease it, I decided to buy it and I have deducted the annual mileage used for business. I keep 2 weeks of typical driving records, of usage from my office to hospital(s) and other business related driving ( to and fro from home to office not counted) and multiply that by 26. This has worked well for 16 years.

[Noah]

Any specific advice on what constitutes a business use of a vehicle for a physician partner (K1 salary). Driving from home office to the main hospital(s)?

As mentioned in the post above, is it ok to only track 2 weeks of usual driving and multiply by 26 to get total miles or do I have to always log each mile which hardly seems worth it.

[jfoxcpacfp]

Noah wrote:

Any specific advice on what constitutes a business use of a vehicle for a physician partner (K1 salary). Driving from home office to the main hospital(s)?

As mentioned in the post above, is it ok to only track 2 weeks of usual driving and multiply by 26 to get total miles or do I have to always log each mile which hardly seems worth it.

Click to expand...

Sorry, but commuting expenses are not deductible. Business mileage once you get to work and before you commute home is deductible.

A business calendar will serve you fine as a log book. I would not be comfortable in advising you to log average miles for 2 weeks and multiply by 26. The only reason it has worked well for Kamban is that  (s)he hasn't been audited on it yet. Probably many of us could say the same about certain deductions on our tax returns.

[Kamban]

jfoxcpacfp wrote:

Noah wrote:

Any specific advice on what constitutes a business use of a vehicle for a physician partner (K1 salary). Driving from home office to the main hospital(s)?

As mentioned in the post above, is it ok to only track 2 weeks of usual driving and multiply by 26 to get total miles or do I have to always log each mile which hardly seems worth it.

Click to expand…

Sorry, but commuting expenses are not deductible. Business mileage once you get to work and before you commute home is deductible.

A business calendar will serve you fine as a log book. I would not be comfortable in advising you to log average miles for 2 weeks and multiply by 26. The only reason it has worked well for Kamban is that  (s)he hasn’t been audited on it yet. Probably many of us could say the same about certain deductions on our tax returns.

Click to expand...

Sorry I should have mentioned multiply x 24 since I take 4 weeks vacation.

I keep one week record in one half the year and one in another half. I record the actual odometer readings for that week and record where I go on what day and choose a typical week. Other than the 2 hospitals, and rarely a third outlying hospital my commute is straightforward and not excessive.

Yes I can still be audited but as far as I know no physician who uses miles for deduction keeps an every day log. Hopefully this will satisfy the IRS.

Yes from house to office and back home in the evening is not counted.

[Noah]

How many miles would a physician typically drive outside of the commute between home and the office/hospital? Perhaps a consultant covering several hospitals in a city but this seems a bit more rare to me.

A quick search does seem to indicate that when you commute to a temporary work location ie locums then this could be deducted as long as the work is expected to last less than 1 year. Also if you have a dedicated home office that is the central place of business. I doubt that would qualify despite how much charting I do from home.

I do have another unrelated art business with a dedicated home office and studio. Any chance that would help? Just hoping...but afraid I already know the answer.

 

As usual, WCI has the answer:

https://www.whitecoatinvestor.com/business-mileage-the-holy-grail-of-tax-deductions/

[jfoxcpacfp]

Most physicians would drive very little, you are correct. Locums work would be one situation, but many if not most locums positions are in other cities and the travel is already covered. Your home office for your current job is likely not going to be a lot of help. Any miles you drive for the art studio are deductible against the income from the art studio.

Never hurts to ask!

[DarrVao777]

Noah wrote:

Any specific advice on what constitutes a business use of a vehicle for a physician partner (K1 salary). Driving from home office to the main hospital(s)?

As mentioned in the post above, is it ok to only track 2 weeks of usual driving and multiply by 26 to get total miles or do I have to always log each mile which hardly seems worth it.

Click to expand...

My partners count driving from the home office (work location #1) to the main hospital/clinic (work location #2) as business use. We do participate in telemedicine so there is a legitimate income earning service being performed at home and it is a requirement for new physicians looking to join our group.

I end up tracking every mile and not just estimating. It is a pain in the @$$ but I pick out one weekend/month and chart out all of the mileage from last month on an Excel spreadsheet. My vehicle is almost exclusively used for business so sometimes it is as simple as just pulling up my work schedule for the month, figuring out which clinic I was at on which day, and plugging in the miles into the spreadsheet.

Noah wrote:

How many miles would a physician typically drive outside of the commute between home and the office/hospital? Perhaps a consultant covering several hospitals in a city but this seems a bit more rare to me.

A quick search does seem to indicate that when you commute to a temporary work location ie locums then this could be deducted as long as the work is expected to last less than 1 year. Also if you have a dedicated home office that is the central place of business. I doubt that would qualify despite how much charting I do from home.

I do have another unrelated art business with a dedicated home office and studio. Any chance that would help? Just hoping…but afraid I already know the answer.

 

As usual, WCI has the answer:

https://www.whitecoatinvestor.com/business-mileage-the-holy-grail-of-tax-deductions/

Click to expand...

I seem to rack up a fair # of miles. Again, as we count our home office as a work location thanks to telemedicine:

- home office to clinic #1

- clinic #1 to clinic #2

- clinic #2 back to home office

- (or on days where I'm only at one clinic) clinic #1 back to home

 

As mentioned in the WCI article, the home office has to be within the same field to count.

[jfoxcpacfp]

DarrVao777 wrote:

I seem to rack up a fair # of miles. Again, as we count our home office as a work location thanks to telemedicine: – home office to clinic #1 – clinic #1 to clinic #2 – clinic #2 back to home office – (or on days where I’m only at one clinic) clinic #1 back to home

Click to expand...

A bit of clarification for others who might be reading this. DarrVao777's telemedicine makes a difference. To be able to deduct mileage to and from from your home office, your home office must be your principle place of business. It sounds to me as if  DarrVao777's situation qualifies.

If you have a home office and your principle place of business is the hospital where you work every day, you can still deduct the home office, but not the round trip to the hospital. That assumes you have no office available for your use at the hospital. If you do, the home office is not deductible.

[Kamban]

jfoxcpacfp wrote:

Most physicians would drive very little, you are correct. Locums work would be one situation, but many if not most locums positions are in other cities and the travel is already covered. Your home office for your current job is likely not going to be a lot of help. Any miles you drive for the art studio are deductible against the income from the art studio.

Never hurts to ask!

Click to expand...

Most internists have seen their commute decline after the advent of hospitalists but as a specialist I still have to go to the hospital. Luckily my home is very close to my office but the hospitals are 10 miles away. Even though they are not too far from each other, I do not have sufficient time to cover both hospitals in one go on many occasions. So I see patients in one hospital during lunch time and in another after my afternoon office clinic finishes. So I can include those 40 miles I travel in a day.

[IRdoc]

Resurrecting this thread but. I do some 1099 work on the side in the early AM and in evenings rather close to my home. I drive from my home to that 1099 locations and then from there directly to hospital (K1). I drive back in evenings from hospital back to 1099 job, the drive home. My interpretation is that my miles from home to 1099 would be deductible (independent contractor) and my miles from 1099 to hospital would also be deductible and back?

[jfoxcpacfp]

IRdoc wrote:

Resurrecting this thread but. I do some 1099 work on the side in the early AM and in evenings rather close to my home. I drive from my home to that 1099 locations and then from there directly to hospital (K1). I drive back in evenings from hospital back to 1099 job, the drive home. My interpretation is that my miles from home to 1099 would be deductible (independent contractor) and my miles from 1099 to hospital would also be deductible and back?

Click to expand...

Your deductible mileage is the additional miles you are driving for 1099 work after subtracting out the round trip commute mileage.