Tax Year Prior to 2020: Scorp Auto deduction

Can an scorp deduct auto expenses for a vehicle used by the scorp, but not owned by the scorp?

HelenC1
Intuit Alumni

Deductions & credits

No, an S Corporation can't deduct auto expenses for a vehicle that it does not own. However, the S Corporation can reimburse you directly for the vehicle expenses. 

  • These paid expenses then reduce S-corporation income by that amount and only the reduced income passes through to you on your K-1.
  • If you're not the only shareholder, you need to keep track of auto expenses and report them to the S Corporation so that all the S Corporation shareholder's share the expenses equally. See Business Use of Vehicles.
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Deductions & credits

So, to clarify, in TurboTax business you just add up all the monthly lease payments, gas, parking, auto insurance that the employee (me) paid from personal checking account for the year, multiply that by the business use percentage, and put that into Vehicle Reimbursement Paid?

 

Then you just move the total  from Business to Personal checking account and make sure the accountable plan can account for the percentage?

ThomasM125
Expert Alumni

Deductions & credits

You have to have an accountability plan. In other words, you need to submit an expense account report periodically to justify the business use of the auto. Otherwise, you can end up being taxed on the reimbursement you receive from the company. 

 

You can read more about this in IRS publication 463 as follows:

 

https://www.irs.gov/publications/p463

 

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Deductions & credits

Right, I have a document that says I have an accountable plan. So using actual costs, I just multiple say 60% business use by all the itemized expenses, and that's a deduction that doesn't need to go on employee's W2. Right?

 

Thanks!

WKins2
Expert Alumni

Deductions & credits

Correct. The employee should be submitting the expenses to the company (60% if that is the percentage), and the company reimburses the employee back, and it is not reported on the W-2 as wages. It is considered a reimbursable expense to the employee and the business gets the expense. 

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Deductions & credits

so if you could please clarify a bit more, when the S-corp reimburse the employee where does the s-corp put that expense (deduction)? 

DianeC958
Expert Alumni

Deductions & credits

The S-Corp would deduct the expenses as part of the business return according to the type of expense i.e. auto expenses, supplies, office expenses, etc.

 

 

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