Vehicle Depreciation and Leasing

[grids]

As an LLC partnership about 17 years ago, an accountant listed a used vehicle purchase as an asset ("listed property"). By looking at our depreciation list, it looks like this was depreciated over 5 years ("conv method" = "5 HY 200DB")? At the time that vehicle was used for business and a separate one for personal; that's what that accountant told us to do. Years later a different accountant told us to track the business vs personal mileage and that both vehicles could be used and my understanding is we filed a certain percent of use for both. Most recently, a different accountant had us change to filing as an S-Corp and to lease both vehicles from ourselves personally to the business at a cost of 2.5% of the original vehicle cost per month. We also still track business vs personal mileage and my understanding is the accountant applies the percent used for business to all receipts categorized as vehicle expenses. Since this has spanned so many years now, and the first vehicle is fully depreciated, and we've changed our tax filing status to S-Corp, is the first vehicle a personal vehicle or does the business "own" it? Once it was fully depreciated, my understanding is the IRS deems it as no longer having a useable life, but we still operate it. How do we capture the expense of it's use by the business now? Do we do the monthly lease, also track mileage percentage, pay all receipts by the business, and then claim the appropriate business use percent of those receipts?

[FranklinF]

Firstly, for an S-Corporation to deduct Vehicle Expenses which includes depreciation, the S-Corporation MUST hold title to said vehicle. An S-Corporation can deduct the BUSINESS MILEAGE for the use of a personal vehicles at the current federal mileage rate if the Operating Agreement of the S-Corporation has an Accountable Plan that clearly states the reimbursement to employees  for the business miles when using their personal vehicles for ordinary and necessary business activities. Employee-owners of an S-Corporation also qualify for the reimbursement for the use of their personal vehicle under the Accountable Plan.

If a car that is FULLY Depreciated is owned by the S-Corporation there are still other expenses, gas repairs etc that can be deducted or use the Standard Deduction for Mileage, if they qualify.

The Auto Expenses of an S-Corporation 
 

[LindaSh]

The deductibility of a vehicle is determined by who owns the vehicle, the business or an individual.  If the business owns the vehicle, you would not track mileage as all expenses of the vehicle are deductible, including depreciation.

If the vehicle is owned by the individual and used for business purposes, then the individual would submit an expense report to the business which will indicate the beginning odometer reading, the ending odometer reading, the date, the business purpose of the trip, and the total mileage.  The business would reimburse the individual for the business mileage only.  Also, the vehicle would be depreciated based on the percentage used for business.  

Here is an IRS publication with details the allowable deductions for vehicles owned or leased which are used for business:  https://www.irs.gov/taxtopics/tc510