Same vehicle used for two companies

[phares24]

Started new company.  Using same vehicle for both. Do I add the vehicle info to the new company and split the expenses between them or do I need to dispose from the old and only show on the new LLC?  How will this affect depreciation?

[Leonard · Accepted solution]

Yes, you can use the same vehicle for both companies.

You will need to enter the vehicle info into the new business.

You do not need to dispose of the vehicle and reenter it in the new LLC.

The vehicle may only be deprecated in one business.

Expenses may be split between the two businesses utilizing whatever expense method you are currently using, actual expenses or mileage expense. It is extremely important to keep accurate records on the usage of this vehicle.

If you are using the expenses method it may be best to allocate these expenses by usage. If one business uses the truck 75% of the time then it would get 75% of the total expenses. 

If you are using the mileage method allocate the mileage based on the miles driven for each business.

Once again bookkeeping and proper records play a major role in determining the split. 

[schisolm]

What if you are no longer operating the first business you began to depreciate the vehicle under, and instead are using it under a new second business? Can you still take the deductions for it under the new business, including depreciation?

[RobertB4444]

@schisolm  Yes.  But the basis transfers to the new business so make sure all prior depreciation is entered and you are depreciating it right from where the first business left off.  And then pay attention to the bookkeeping and deductions as @Leonard states above.

[LRL]

I had a Sch C business, which had a loss in 2020. I closed the business in 2021 and started a new Sch C bus. I'm using the same vehicle for my new business. IThe leased vehicle was placed in service in 2019. How do I enter the vehicle info for the new business? 

[ZoltanB45]

Being  that you closed the one business before opening another and that it is a leased vehicle we are talking about makes it easier. There won't be an issue with basis, depreciation or mileage.  Just add the vehicle asset in the new business and write off the lease payments from the day you began using it for the business. You can write off the lease payments made during the time the old business was active in 2021 as well.

[LRL]

@ZoltanB45 I purchased my '19 leased vehicle last month and don't want to complicate next year's filing. I'm looking for the easiest method, even if it doesn't give me the highest write off this year. For the old business, I used the standard mileage rate, not actual expenses in '19 & 20. The vehicle was put in use in '19.

For the new business, if I use actual vehicle expenses, I know it's a higher right off for '21 because I have lease payments but I have to stick with that method for 2022 taxes and don't want to deal with any recapture issues or ATM. The new business really just a little side gig that I hope will be profitable soon, but it had a loss for '21.

[ZoltanB45]

If you have been writing off the lease payments, you would not take mileage now. Begin taking depreciation on the amount you paid for the vehicle.

[vwilliamsccc]

I am stuck with knowing EXACTLY how to complete my and I Federal tax return for 2021 with our 1 truck we used for a business from Jan-April 2021. Then closed that business dues to mother needing Caregiver while going thru cancer. My husband started a RV transportation using same vehicle from May-Dec 2021. Don't understand how to determine depreciation and macros numbers. 

[Critter-3]

Ok ... on the first business you will take the asset out of service by converting it to personal use to stop the depreciation if you have been taking it.  Save a PDF of the return for a copy of the depreciation worksheet.

Next enter the vehicle as a new  asset on the new business and use the depreciated basis from the worksheet.  The 5 year depreciation time frame starts over again.

[jane5]

Thanks. Helpful answer.

To clarify,let's say mileage was 70/30 split between the businesses.

You'd enter same the total miles driven under both businesses

and enter the 70/30 miles used for business?

[KrisD15]

Yes, as long as they were used ONLY for business and had NO personal use. 

For example, if the vehicle was driven 2,000 miles total, and 1400 was for business A and 600 was for business B, the way you suggest to enter mileage would be correct.

If, on the other hand you ALSO use it for for personal use, and you drove 2,000 miles, 1000 personal, 700 for Business A and 300 for business B, your business A use would be 35% and Business B would be 15% which would be relevant for prorating actual costs, depreciation, and for the gain or loss you would report when that vehicle is sold. 

[IrfanKad]

If business A used the vehicle for 2 years using standard mileage method now business B wants to use it but wants to use actual expense, is that possible

[CatinaT1]

Did Business A sell the vehicle to Business B, or do Business A and B share the vehicle?

[IrfanKad]

Business A used it in 2020 & 2021 stopped using in 2022.  Business B is new started in 2022. Vehicle is under name of owner of business A and spouse in starting business B. Since its same house hold the vehcile wasn't really sold from A to B.

If A used standard mileage method can B use actual expense starting 2022 first year of its use.