Only One Way to Get the Tax Benefits of Your Corporate Vehicle
If you run your business as an S or C corporation and drive a vehicle titled in your personal name for company business, the way you handle reimbursements matters. Since the Tax Cuts and Jobs Act (TCJA) changed the rules for 2018 through 2025, there’s only one way to get the tax benefits you deserve without losing deductions or triggering problems with the IRS.
The Big Picture
When you use a personal vehicle for corporate purposes, that car becomes a business vehicle to the extent of its business use. But here’s the catch: if your corporation doesn’t reimburse you properly, you could lose valuable tax deductions. The fix is simple—your corporation must reimburse you for the business use under an accountable plan.
That reimbursement can be based on either the IRS standard mileage rate or your actual expenses, including depreciation. Your corporation deducts the reimbursement as a business expense, and you, as the employee, don’t report it as income. Everyone wins—except maybe the IRS.
Why Reimbursement Is Essential
Before the TCJA, employees could deduct unreimbursed business vehicle expenses as itemized deductions. That’s no longer the case. If you’re an employee of your own corporation, the only way to benefit from business use of your personal vehicle is through a corporate reimbursement plan. Otherwise, you’re driving a business car without any business deduction.
Document Everything
To support a reimbursement, your corporation needs proper documentation. The most important item is a mileage log that tracks every trip—where you went, when, and why. Without a log, the IRS can disallow your deductions entirely. Whether you use an app or a simple notebook, consistency matters more than the format.
Reimbursing Actual Vehicle Costs
If you use the actual expense method, you can include depreciation, insurance, repairs, gas, and maintenance. But to include depreciation, the IRS expects an “enhanced expense report” that details the vehicle’s cost, ownership, business-use percentage, and acknowledgment that you’ll adjust your vehicle’s basis accordingly. This documentation protects both you and your corporation in the event of an audit.
Using an Accountable Plan
Your corporation’s reimbursement policy should be structured under an accountable plan—a simple document stating that employees (including you) must submit timely expense reports with receipts and mileage logs. This allows the company to deduct the expenses and ensures you don’t have to report reimbursements as income.
If you use the mileage rate method, you’ll only need to track business miles, parking, and tolls. If you use the actual expense method, include copies of your receipts for operating costs along with your mileage log and enhanced expense report.
Why the Vehicle Might Be in Your Personal Name
There are plenty of reasons a corporate owner keeps a vehicle titled personally—better financing terms, lower insurance rates, or legal protection. The IRS allows this as long as the corporation reimburses you correctly and the business use is well documented.
Your corporation can reimburse you for all qualifying expenses under the tax code, including depreciation, Section 179 expensing, and bonus depreciation. The key is that the corporation pays for the business use through proper reimbursement rather than owning the vehicle outright.
Tax Treatment
When reimbursements are handled properly, you don’t recognize income, and the corporation gets a full deduction. If your business is an S corporation, the reimbursement reduces the corporation’s income before it passes through to you—meaning you effectively pay less tax on your business profits.
Keep in mind that you’ll need to reduce your vehicle’s basis by the amount of depreciation or Section 179 deductions reimbursed by the corporation. If your business use drops below 50 percent later, you’ll need to recapture part of the deduction. This rarely happens when the vehicle remains in consistent business use, but it’s worth knowing.
Quick Checklist for Audit-Proof Reimbursement
- A detailed mileage log showing business vs. personal use
- Expense reports for fuel, repairs, insurance, and maintenance
- An enhanced expense report if claiming depreciation or Section 179
- A simple accountable plan policy on file with the corporation
Why It Matters
It’s common for small business owners to drive personal vehicles for company business, but few document it properly. Setting up a reimbursement plan through your corporation turns those everyday miles and maintenance costs into legitimate, deductible business expenses. Done right, it’s one of the simplest ways to save money on taxes while staying fully compliant.
At Ken-Mar Tax, we help corporate owners and entrepreneurs build legitimate reimbursement systems that maximize deductions and minimize audit risk. If you’re using a personal car for business, it’s time to make sure your corporation is doing it right.
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."
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