A recent Tax Court case involved a similar issue with a dentist. The dentist put a license plate holder on his car that displayed the name of his dental practice. He tried to deduct 100% of his car expenses but the Tax Court ruled against him.
The general rule is that you can deduct car expenses when you make trips that are “primarily” for business purposes. This means that more than 50% of the reason for making the trip is for your business. Examples might include: field trips, trips to the bank to deposit money, trips to training classes, trips to the grocery store when you spend more than 50% of your money on business food, and so on.
If a trip is primarily for your business you can claim the miles driven as business miles. When claiming car expenses you can use the standard mileage rate ($.54 for 2016) and multiply it by your business miles. In addition, you can deduct tolls, parking and the business portion of car loan interest and property tax on the car. If you use the actual expenses method and deduct the business portion of all your car expenses.
The business portion of your car is determined by dividing the number of business miles you drive by the total number of miles you drive. So if you drove 2,000 business miles and 10,000 total miles your business portion is 20%.
Putting signs on the side of your car or on its window does not create a trip that is primarily for business purposes.
You can deduct the cost of the car sign.
This court case reminded me of the time I once bought a new license plate holder that said, “Family Child Care: The Caring Profession.” The first time I drove my car I got a ticket because the holder covered up too much of the license plate!
Tom Copeland – www.tomcopelandblog.com
Photo credit: sculleydesign.com
For more information on what is deductible in your business, see my book Family Child Care Record Keeping Guide.
Tom Copeland, www.tomcopelandblog.com