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Most adults know how to buy, insure, store, maintain, and service their personal cars and trucks. However, when it comes to business use, the rules are different. Here’s a quick rundown of what every business owner should know about business vehicles.
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What You Need to Know About Business Vehicles
If your company owns business vehicles, there are a few things you need to know. For example, owning and maintaining a company car or truck can mean extra insurance needs. It can also require special kinds of registration, added precautions for whomever operates the vehicles, and other considerations.
What Is a Business Vehicle?
For legal purposes in the US, any vehicle you use to conduct your regular operations is a business vehicle. Note that the definition does not include heavy equipment such as dump trucks and cranes. These machines are used in, but not for, the organization.
For the most part, however, if it has wheels and you or your employees drive it, it falls clearly into the range of the definition.
How Will You Deduct Your Expenses?
You have the option of deducting actual operating expenses for your business vehicles or to take a standard deduction of 58 cents per mile. The decision is yours.
Most business owners calculate the figures both ways. Then they opt for the reporting method that saves them the most money. Or, if they don’t want to crunch all the numbers for each business vehicle to calculate actual costs, which can be a major headache, they simply take the mileage deduction of 58 cents per mile.
However, the rules are different for electric and hybrid cars. Moreover, new laws are about to change those rules a number of ways.
Therefore, always check to see what the latest IRS regulations are for mileage deductions for your business vehicles. For example, the government regularly increases the per-mile deduction allowance. Therefore, you’ll likely need to use a different figure every year.
Obtain the Right Insurance
Different auto insurance is needed for business vehicles. You can’t rely on your personal vehicle policy for protection.
Therefore, speak with an experienced agent and find out what your options are. Usually, you can get a significant discount if you own several cars or trucks and use them for company work.
One important aspect of commercial insurance relates to liability. Suppose one of your workers causes an accident or injury while driving one of your company’s vehicles. In that case, you’ll need the right amount, and the right kind, of commercial insurance.
For these reasons, it’s important to consult with an experienced agent. Explain exactly how your company uses the business vehicles in your fleet. Let the agent know who drives the vehicles, how often they are used, and any other pertinent details. Commercial policies need to be tailored to the specific ways that a company operates.
Keep Detailed Records on All Your Business Vehicles
No matter how you opt to report expenses, the IRS suggests keeping meticulous written records of mileage and service expenses on all your business vehicles. What’s more, you need to keep records on the purpose of each trip, who does the driving, whether there are any passengers, and more.
Fortunately, there are some great apps you can use to store all the required data quickly and easily. The point is that if the IRS asks, you might have to show them all the data about your business vehicles. If you don’t have the information, you stand to lose a major tax write off.
What’s the lesson? Keep great records on all your business vehicles, because you’ll probably need to turn them over to an auditor someday.