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RivenSnow
Returning Member

Am I required to report personal car use for sole proprietorship?

I have a small sole proprietorship (music and art related) and I rarely drive for any business reason, but three times in 2023 I drove a personal vehicle to go perform (<500 miles) and did not keep good records about which of the personal vehicles I drove (or even if it was mine or my fathers), or specific mileage. In addition, one of the trips my family came with me to visit relatives while I worked in the same region. 

 

I would rather consider the vehicle a personal vehicle expense and not deduct mileage or record depreciation, etc, as I do not have records of which vehicles or total miles for personal or business reasons. 

 

I can't actually answer all the related questions in Turbotax to figure out amounts of car registration, personal miles, which vehicles, depreciation. The questions are far more in depth about depreciations and such than I could address even if I had kept the specific miles of the times I used it for business. 

 

 But I am not sure if I am legally obligated to claim the car use or if I can simply not claim it as a business expense. Any guidance here? 

 

 

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1 Reply
KrisD15
Expert Alumni

Am I required to report personal car use for sole proprietorship?

The IRS requires every Self-Employed taxpayer to claim all their business expenses. 

Why?

There are credits and deductions that are based on income, such as the Earned Income Credit, Child and Dependent Care Credit and Qualified Business Income Deduction. 

 

If you didn't keep records, it would be difficult to claim any vehicle expense, but I would suggest you make an educated guess going forward. Even using the Standard Mileage Rate involves depreciation and the IRS is very adamant when it comes to claiming depreciation. 

Why?

Because when the asset (vehicle) is eventually sold, the business owner may be liable for Depreciation Recapture which is taxed as Ordinary Income. 

 

If you use a vehicle for business, please keep a detailed log recording business and personal miles driven.

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