Are you hoping to write off more than one vehicle and have been told you can't? Contrary to popular belief, the IRS does not limit business owners to claiming deductions on only one business vehicle.
When Should You Write Off More Than One Vehicle?
You might maximize tax benefits by using multiple vehicles for business purposes. This is particularly true when
- you use the vehicles predominantly (more than 50 percent) for business,
- you drive more business miles than your spouse, and
- the vehicles have closely aligned adjusted bases.
The allowability of multiple vehicle use is made clear in both:
IRS Publication 463: Writing off Multiple Cars
In this publication, the IRS offers guidance to help you claim travel, gift, and car expenses on your tax return. In its explanation of the rules on using the standard mileage rate to deduct your car use, the IRS includes the following example:
A salesperson owns three cars and two vans that they alternate using for calling on their customers. They can use the standard mileage rate for the business mileage of the three cars and the two vans because they don’t use them at the same time (emphasis added). You can clearly see that the IRS allows you to use more than one vehicle for business.
IRS Form 4562: Up to Six Vehicles
The second source of evidence of IRS approval of deductions on more than one business vehicle comes from IRS Form 4562, in which the IRS provides space for six vehicles used by proprietors, partners, and othermore-than-5-percent owners.
What the Courts Say About All This
Acceptance of the multiple-vehicle strategy has come not just from the IRS but also from the courts. Several tax court rulings have upheld your right to claim business deductions on multiple vehicles within the same tax year. In at least three cases, the Tax Court has upheld a taxpayer’s right to claim business deductions on more than one vehicle during the same tax year.
Melvin v Commr., 88 T.C. 63 (1987)
- What Happened: IRS allocates mileage between business use and personal use on three different cars during the same tax year.
- What Court Said: Court has no problem with and actually relies on the allocation to decide this case on other grounds.
World of Service, Inc. v Commr., T.C. Memo 1995-456
- What Happened: Nutrition consultant claims deductions for business use of three cars during the same tax year.
- What Court Said: Court okays deductions for 50 percent of gas, repairs, depreciation, and maintenance for each car.
Fisher v Commr., T.C. Memo 1997-225
- What Happened: Horse breeder claims depreciation on five vehicles in Year 1 and six in Year 2.
- What Court Said: Court has no problem allowing depreciation of each vehicle but cuts amount of allowable depreciation for lack of documentation.
Example of Writing off More Than One Car
Here’s an example of how you might benefit: An attorney, Mel, utilized his and his wife’s vehicles for business purposes. By strategically alternating between using the two cars for business trips, he increased his deductions by up to $32,460 without spending more money or driving more miles.
This real-world scenario illustrates a fundamental but often overlooked principle of business vehicle deductions for married couples: the right to claim deductions is not limited to one vehicle. But the real question is, when does driving two vehicles for business put more business tax deductions on your income tax return?
Here’s the answer. You will realize more tax deductions when you actually use each vehicle for business; drive more miles than your spouse does; and own vehicles that are somewhat similar in adjusted basis (usually you can just think the vehicle cost here).
In this case, Mel satisfies all three conditions, which means he pockets more after-tax cash benefits by driving both vehicles.
Key point: If Mel were single and owned two vehicles, he should drive both for business. But when there’s another driver, you must examine the numbers—and Ken-Mar Tax can walk you through the scenarios and calculate how this might benefit you.
Small Business Tax Services
As an expert in small business tax services and tax consulting Ken-Mar Tax eats, sleeps and breathes small business tax strategies. Being an enrolled agent allows founder, Ken Weinberg, to represent you to the IRS - something only a CPA, tax attorney and Enrolled Agent can do. EAs are the only federally licensed tax practitioners who specialize in taxation and also have unlimited rights to represent taxpayers before the IRS. It also means he is continuously being updated on the new IRS tax codes and taking classes from the IRS that provide guidance on how to file returns so that they are not "flagged."
When you get your taxes prepared by Ken Mar Tax you also have the option to purchase the Tax Audit Protection Plan to avoid the extra costs of paying for audit representation. If you are audited by the IRS, State of Ohio or local taxing authorities, Ken-Mar Tax will meet with the taxing authorities on your behalf to negotiate a settlement for you. The fee covers all costs up to the Appeals level, including up to 15 hours of correspondence with the auditing party – either the IRS, State of Ohio or locality.