For every business owner, there comes a time when the old vehicle will no longer suffice. Or, perhaps this is the year that you need a special purpose vehicle such as a delivery truck or van.
At some point, nearly every business owner will have to consider purchasing, leasing, or otherwise obtaining a vehicle. Before you purchase a vehicle, becoming familiar with the following tax matters may help you save money:
- Excise taxes may be imposed on the vehicle that you purchase.
- Clean-fuel vehicles such as gas or electric-powered cars are eligible for special tax breaks.
- The expensing election may allow you to deduct a portion of the cost of a vehicle initially placed in service during the year.
Once you've made the decision that you need a vehicle for your business, our first recommendation is that you try to conserve your capital by converting a vehicle you already own to partial or full-time use in your business.
Remember that vehicles generally depreciate in value and are poor investments in and of themselves. If you are the owner of a new business, whatever capital you have should be put into the things that will most directly generate revenue and that usually won't include a new car.