tax writeoff?

[Bert]

I am not an accountant or a tax lawyer; are you?

I am a CPA

I said nothing about deducting $5000 per detail. I think if he keeps it reasonable, he should not have a problem. Again, this is only if he is using the actual expense method. I use the mileage deduction, so things such as vehicle maintenance are built into that deduction.

While I know you said you were not deducting $5000, I was simply responding to your comment where you said, "just deduct the same amount that you would charge someone for that service". My reply was that if Paul Dalton lived in the US and was to perform one is his $5000 details (which he charges customers) to his own work van, he could not write it off. The only thing you could write off is what actually came out of your pocket or your actual expenses for the supplies you used.



For example, if a CPA bills $200 an hour and it takes him three hours to do the return of his own CPA firm, he could not deduct $600 as tax preperation fee on his taxes since the $600 did not actually come out of his pocket.



The exception to this is where the IRS for simplicity says you can use a different method such as the standard mileage deduction for cars than trying to determine how much gas you used while working on client cars, what percentage of depreciation to apply to business expense etc..

 

[Got Wax]

If you claim your home office on your taxes, you will pay if you sell your home

 

[Bert]

If you claim your home office on your taxes, you will pay if you sell your home

The taxes and paperwork involved in home office deduction make it almost not worth taking the deduction.

 

[Scottwax]

I suppose you could hire you kids as employees and have them clean the vehicle...

As long as your kids are under 18 and you have a sole proprietorship, your kids can work for you tax free in the family business.

 

[Got Wax]

As long as your kids are under 18 and you have a sole proprietorship, your kids can work for you tax free in the family business.

I have only a 10 year old daughter! What I wouldn't give for four teenage boys. Can you say slave labor!:clap:

 

[BobD]

Your best bet is to get a good accountant. You'd probably be surprised at what you can write off.

 

[imported_Jakerooni]

paying a CPA $150 is worth it's weight in gold to deal with this stuff. One person can't effectively do everything all of the time when running a business. You worry about making your clients happy get a CPA to worry about making the IRS happy.

 

[tresola]

I have a related question. Right now I own two cars, but was going to sell one. I have loans on both cars. If I end up starting a detail business like I'm thinking on it, I want to keep the car I was going to sell and use it solely for business. Would my business then take over the payments for the vehicle? Are those payments a tax write-off? Otherwise does my business have to purchase the vehicle from "me" in order for it to be a business vehicle? I'm thinking it is then set up as a fixed asset with a depreciation schedule, correct? I've done a bunch of accounting, but I haven't dealt with these type of situations yet, only IT equipment...

 

[Bert]

I have a related question. Right now I own two cars, but was going to sell one. I have loans on both cars. If I end up starting a detail business like I'm thinking on it, I want to keep the car I was going to sell and use it solely for business. Would my business then take over the payments for the vehicle? Are those payments a tax write-off? Otherwise does my business have to purchase the vehicle from "me" in order for it to be a business vehicle? I'm thinking it is then set up as a fixed asset with a depreciation schedule, correct? I've done a bunch of accounting, but I haven't dealt with these type of situations yet, only IT equipment...

It has been years since I did small company taxes but here is how I recall what you will have to do.



Will the business be sole prop (Sched C on 1040), a LLC (1096 I think) or a S or C Corp (1120 or 1120S)? I ask because if your return includes a balance sheet, this transaction will affect your tax payer basis.



Contributing an asset from personal use to business use when you still have debt on the asset starts getting things a little hairy. If you can avoid this transaction, I would recommend doing so.



Basically you will have to determine the Fair Market Value of the car you want to use soley for business. Using Kelley Blue Book or NADA would probably be the best method. Then take that amount minus the principal amount you still owe on the car (not the same as the sum of the remaining payments, it will be less due to the interest on the loan). The difference will be what your business should pay for the car (and assume its related debt) or how much your tax payer's basis will increase should you simply "give" the car to your business. The car payments will only be tax deductible to the amount of the payment that is interest. Similar to how only the interest portion of a mortgage payment is deductible. The business's tax basis of the car will the the full Fair Market Value of the car and that is what depreciation would be determined by.



Keep in mind this is not something someone should go into w/o consulting a CPA first. I am a CPA but I dealt mostly with financial statement audits and now corporate accounting and only dabbled in small business taxes. I basically learned enough to get me through the CPA exam. Unless money is plentiful for you, I would recommend selling one of the cars and using the proceeds to pay off the other car so you don't have a payment anymore and if you have any cash left over, use that to buy detailing supplies and equipment (steamer, extractor whatever) and then keep track of your mileage while detailing and take the standard mileage deduction.