Car Modification Based YouTube Channel

[TJD1999]

Can a car modification-based YouTube channel deduct car parts/repairs/modifications that are made on camera?

This is in reference to this post , they said you cannot deduct car parts/repairs if they're for personal use. Whereas if the repairs are on camera and posted to YouTube, wouldn't that count under a business expense? 

[Opus 17]

The rules regarding how to deduct expenses and how much expenses you can deduct, when you have a personally owned vehicle that is also used for business, are spelled out in chapter 4 of IRS publication 463, and are based purely on mileage driven for each purpose.

https://www.irs.gov/pub/irs-pdf/p463.pdf

The basic tax principle is that anytime you have an expense that is of mixed business and personal use you must have a reasonable way to allocate a portion of that expense to the business, and for personally owned vehicles, the IRS regulations are based on mileage.  That means that if you have a personally owned vehicle that you drive 10,000 miles a year, and 100 miles per year are used in the making of the video or testing purposes, then you can deduct 1% of your vehicle expenses and that includes repairs and maintenance.

I would consider it possible that if you installed components to make a video and then removed them so that they were no longer part of your vehicle, you could make the argument that 100% of the cost of the components could be allocated to the business, since the components were never used for personal use.  Components that remain on the vehicle, and that become part of your personal use of the vehicle, could never be written off 100% as a business expense. The IRS regulations clearly focus on mileage as the proper method of allocating the expenses.

More expert advice from your own tax professional might be advisable.  

[Edited to add]

You certainly must be reporting your YT income as a schedule C business, rather than a hobby, before you can deduct 1 cent of expenses.  Assuming this is a schedule C business, the rules for deducting vehicle expenses are as I described. 

[rjs]

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@TJD1999 wrote:

if the repairs are on camera and posted to YouTube, wouldn't that count under a business expense? 

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Is the YouTube channel a business? Are you operating it as a business and making a profit from it, or at least making a business-like attempt to make a profit? If it's not a profit-making business, the IRS considers it a hobby, and you cannot deduct any of the expenses.

[Cavinmccord]

What if I were to build just a motor for a video and not use it in any specific vehicle could that be written off?

[DianeW777]

It depends.  If you are using this motor to create a video in a business that is producing income then you may deduct the cost of the motor.  The deduction could be the full cost of the motor on your business (Schedule C) if it has less than a one year life, or as a depreciable asset where you have options about how much you can deduct in the first year you place it in service for your business.

• What is a Schedule C?

If the motor is used at any time for personal purposes then a log must be kept for personal hours versus business hours to arrive at the correct percentage of business use.

If this is a hobby, the rules are not the same.  All income would be required to be reported and there would be no deduction for the motor even if you itemize deductions because this has been suspended due to the Tax Cuts and Jobs Act (TCJA) from 2018-2025.  

Likewise, if it is being used in any vehicle, you would use the same record keeping of hours used for business.  Only the business use percentage of the cost of the motor would be allowed to be deducted from your business income.

@Cavinmccord 

[Opus 17]

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@Cavinmccord wrote:

What if I were to build just a motor for a video and not use it in any specific vehicle could that be written off?

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You can deduct ordinary and necessary expenses for your type of business.  "An ordinary expense is one that is common and accepted in your field of trade, business, or profession. A necessary expense is one that is helpful and appropriate for your business. An expense does not have to be required to be considered necessary."

However, there are two issues, what happens before and after?

First, if you purchase items with an expected life of more than 1 year, they are assets, and must generally be depreciated over time.  Sometimes, you can expense an asset in the first year, if it costs less than $2500 for example, and there are some other rules that might let you expense the item immediately.  For example, if the engine block costs more than $2500, that's probably an asset.  Then, what happens if you improve an asset?  That normally adds to the depreciation, rather than being an immediate deduction.  Such as the cost of pistons, camshafts, etc.  So I really can't say if you can expense all the parts in the year you create the motor, or if you have to depreciate them.  (But you also can'r depreciate items you hold less than 1 year, so that leads to the question of what do you do after the video is finished?)

Then, what happens after the video is done?  If you sell the motor for more than the adjusted cost basis, that's taxable business income.  Your basis is the price you paid for the parts, minus any depreciation.  So if you did deduct the entire cost of the parts as a business expense, and then you sell the motor, the entire selling price is business income.  Do you give it away as a raffle to your viewers?  That's ok, but you can't "write off" anything else for the giveaway, if you already deducted the cost of the parts.  Do you convert it to personal use by installing it in a personal vehicle?  That could create a taxable event depending on what kind of expense deduction you used.