Since my vehicle is personally owned personally, do I have to show costs paid as employee income and is it taxable?

learn more about Ryan Himmel

By Ryan Himmel

Opinions expressed by Entrepreneur contributors are their own.

Can I pay for all the vehicle costs through the company and deduct those costs at the end of the year? I am the accountant of a small corporation run by my family. We were unable to purchase a vehicle through the company because it was established just this year.
Congratulations on the new family venture! You treated the start-up costs correctly in that you created a due to shareholders (i.e. loan) for the investment of the vehicle. Before I tackle the tax deduction question, there are a few things to keep in mind.

First, the loan that is due to the shareholde--or in this case due to you--will have to accrue interest. That interest is due to you and the corporation needs to issue a 1099-INT for any interest that accrues and is paid to the debt holder (you) which exceeds $10.

Secondly, you need to transfer title of the vehicle to the business if you haven't already done so.

Thirdly, given the limited information, it is very difficult for me to provide you with an exact answer regarding the tax deduction amount for your vehicle. However, I will provide general guidance regarding start-up costs and tax deductions.

Generally speaking, business start-up costs prior to incorporation can be deducted up to $5,000. The $5,000 deduction is reduced by the amount your total start-up or organizational costs exceed $50,000. Any remaining costs must be amortized.

So, in your case, if the vehicle is in fact used solely for business purposes it would appear as though you would be able to deduct those start-up costs up to $5,000 in the year incurred. Any amount of costs thereafter would be amortized. Vehicle amortization can vary so I would need more information to provide further detail.

Good luck with the new venture and let us know if you have any more tax questions.
Ryan Himmel

Head of Financial Partnerships, Xero Americas

Ryan Himmel is a CPA and financial technology executive who has dedicated over a decade of his work toward providing solutions to help accountants and small-business owners better run their firms. Himmel currently leads financial partnerships in the Americas for Xero.

Related Topics

Editor's Pick

The Dark Side of Pay Transparency — And What to Do If You Find Out You're Being Underpaid
Thinking of a Career Change? Here Are 4 Steps You Can Take to Get There.
A Founder Who Bootstrapped Her Jewelry Business With Just $1,000 Now Sees 7-Figure Revenue Because She Knew Something About Her Customers Nobody Else Did
Everything You Need to Know About Franchise Law
Starting a Business

90% of Online Businesses Fail in Just 4 Months. You Can Avoid the Same Fate By Using These Strategies.

It's not catastrophizing when we think about potential failure; it's in fact a chance for any business to precisely see any outcome and prepare in advance.

Business News

A Scammer Posing as Elon Musk Tricked a Florida Principal into Sending $100K in School Funds: 'I Fell for a Scam'

Dr. Jan McGee has since resigned as principal of Burns Science and Technology Charter in Oak Hill, Florida.

Business News

'Crying Northwestern Kid' Turned His Viral Fan Moment Into a Successful Harvard Admissions Essay. He Says the Experience Taught Him About Empathy.

Six years ago, Phillips was watching No. 8 Northwestern take on No. 1 Gonzaga during March Madness when he became a meme.


What Is a Brand Personality? Here's How to Develop One.

Connect with your audience on a deeper level by giving and cultivating your brand a personality. Read here how to do so.