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Automobile Tax Writeoff for Karate Studio

 

Quick question for the group.  My kids’ karate instructor was wondering if there was a way he could write off any of his vehicle expenses.  He’s looking to buy a new car (or lease) and is wondering if he can write off the lease payment, the maintenance, or any of the other expenses.  Does anyone have any knowledge or experience in this area?

Answers

Topic Expert
Deborah Godfrey
Title: Budget Administrator, Business Manager, ..
Company: Seeking Employment
(Budget Administrator, Business Manager, Project/Program Manager, Seeking Employment) |

Well, certain vehicle expenses can be written off on taxes if the vehicle is used for business purposes. For example, mileage used of business can be used as an expense on Schedule C; however, if the vehicle is used for both business and personal, only the business mileage can be used. The client would need to keep a log of the actual business mileas. Certain maintenance expenses may also be deducted--that requires knowlege of the tax prepare so that proper reseach can be done. In some instances, ad valorem taxes and sales tax can also be considered, but not the tag fee itself. The IRS Pub 17 and instruction book for Schedule C provide a wealth of information on this matter. The IRS website is http://www.irs.gov. I hope this helps

Bobby Bluford
Title: VP, Finance
Company: Printroom, Inc.
(VP, Finance, Printroom, Inc.) |

Thanks, Deborah. That does help.

Topic Expert
Deborah Godfrey
Title: Budget Administrator, Business Manager, ..
Company: Seeking Employment
(Budget Administrator, Business Manager, Project/Program Manager, Seeking Employment) |

My pleasure to assist you.

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

To expand on Deborah's very good answer, if the Instructor goes to and fro his place of business to obtain any material, meet with clients, vendors, etc, then those miles are business expenses.

I would add a note, if he takes any of his clients (kids) in the car, he should not only have business insurance to cover such activity but think twice before he does.

HAROLD LEDERMAN
Title: DIRECTOR OF INTERNAL AUDIT
Company: JGB
(DIRECTOR OF INTERNAL AUDIT, JGB) |

Just to clarify, the main question is whether the karate instructor is an independent contractor or an employee. As an independent contractor, the cost of going from one workplace (such as home) to another, and traveling to see clients, would be deductible. If the karate instructor is a W2 employee, the cost of getting to work would be considered commuting, as Nancy pointed out.

Bobby Bluford
Title: VP, Finance
Company: Printroom, Inc.
(VP, Finance, Printroom, Inc.) |

Thanks, Wayne, Nancy, and Harold.

ionel berezenco
Title: Admin
Company: Top Projecto
(Admin, Top Projecto) |

I am sure you can if you own a business you can writeoff a lot of expenses provided they are for the firm. I heard some employees at Reedman Toll car dealers talking , that they do just that and it is quite easy and you can save up even as much as a new car.

Gerri Lazarre
Title: Owner
Company: TriMerge Consulting Group, PA (dba TriMe..
(Owner, TriMerge Consulting Group, PA (dba TriMergeCPA)) |

At the end of the day, it really comes down to recordkeeping and keeping a log as Deborah mentioned, regardless if you are an employee for your own business (i.e. S corp or C corp) or someone elses or a sole proprietor recognizing the income and expenses on your Schedule C.

I see a lot of good comments and responses, this is because all of them need to be looked at, you have to take a holistic approach with this.

On the one hand if the business purchases or leases the vehicle, then the expenses (i.e. cost for insurance, petro, maintenace, depreciation, lease payments etc.) associated with the vehicle are deductible by the business, however, if the vehicle is used for personal use by the owner for any reason, then the owner has to distinguish btw the personal use of the vehicle and report the allocation of this cost as part of his/her income. The allocation of cost for the personal use is not deductible by the business except that it would be through the W2 of the owner or flow through as a distribution depending on how the business is structured. If the vehicle is really for personal use but the owner is using it as part of his business to handle administrative affairs and generation of revenue then it's best to have the owner purchase/lease it and then track the expenses for the vehicle and the mileage (i.e. business, personal, commuting) because you will need this to determine how to allocate the deductible actual business expenses or business miles, whichever is higher.

If the individual is an employee, he/she can still deduct the expenses associated with using the vehicle for work, however, it is limited in terms of the deductible amount since its only deductible on the Schedule A as an itemized deduction subject to the 2% limitation of AGI for the excess not reimbursed by the employer.

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