Business & farm

I made a big mistake above.

I said "Generally speaking, if you lease the car, you can't deduct work-related use starting in 2018.  The partnership can reimburse you, but it would be considered part of your taxable income (your draw)."

This is not the only option.

If you own or lease the car in YOUR name, there are 3 ways the partnership could reimburse you.  All of these are deductible expenses to the partnership.

1. Non-accountable expense plan.  The partnership simply pays you for the use of your car without requiring proof, documentation or receipts.  This is gross taxable income to you, and deductible by the partnership as part of your salary (draw).  And as of 2018, you can't deduct the expenses on your tax return as an itemized deduction.

2. Accountable expense plan using the standard mileage rate.  The partnership reimburses you for business use of the car at the standard rate of 54.5 cents per mile.  You must keep a mileage log, diary or app that shows the date, business purpose, and mileage of each trip, and you must submit this as proof to the partnership on a "timely" basis to support your payments.  The partnership can pay you in advance but you must "true up" the mileage at the end of the year and return any excess.  In this case, the reimbursement is not taxable to you.

3. Accountable expense plan using the actual expense method.  The partnership reimburses you for your actual business use expenses.  You must keep the same mileage diary, plus you record ALL your expenses for the year (gas, maintenance, insurance, depreciation, lease payments, repairs) and you record your total miles drive for business + personal use.  At the end of the year, you figure your percentage of business miles, and you get reimbursed for that percentage of your total proven expenses.  Again, the partnership can reimburse you in advance but you must "true up" the expenses at the end of the year and return any excess.  In this case, the reimbursement is not taxable to you.  The standard mileage method is more lucrative for most people and has less paperwork burden.

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Or as mentioned, option #4 is for the partnership to lease the vehicle in its name, and you can pay for gas and repairs with the company credit card too.   In this case, you should also keep a mileage diary of work and personal miles.  At the end of the year, you figure your true percentage of personal use.  The percentage of total car costs that are business use are deductible by the partnership as a work expense.  The percentage of car costs that are for personal use are deductible to the partnership as part of your salary, and are included on your K-1 as part of your gross taxable income.

I really couldn't tell which will be overall best for the partnership or you, except that #1 is the worst (highest total tax for you).