as a sole proprietorship or even a single-member LLC you can personally deduct the business portion of the vehicle expenses. if your business is a corporation the answer is no deduction unless there is an accountable plan where the corporation reimburses you for business use because you are an employee and employee business expenses are not deductible through at least 2025
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Overview of the Rules for employee/corporation
Your corporation reimburses you under the accountable-plan rules. Under these rules, you, the owner-employee, must:
incur these expenses in the performance of your duties for the corporation, and
substantiate the expenses to the corporation in accordance with any specific conditions imposed by the Internal Revenue Code.
For example, if your corporation reimburses for vehicle expenses, then you (the employee) must submit the documents that support these deductions in accordance with the rules for the deductions.
Failure Is Not an Option
If you, the owner-employee, fail to submit adequate proof, your corporation must include the expense reimbursements in your W-2. Incorrect treatment can cause payroll tax penalties, such as the attention-getting 100 percent trust fund penalty.
With proper proof, your corporation gets the tax deduction for what it reimburses you. You, the owner-employer who receives the reimbursement, have no taxable income.
Overview of the Rules
In technical terms, your corporation reimburses you under the accountable-plan rules. Under these rules, you, the owner-employee, must
incur these expenses in the performance of your duties for the corporation, and
substantiate the expenses to the corporation in accordance with any specific conditions imposed by the Internal Revenue Code.
For example, if your corporation reimburses travel, business meals, or automobile, computer, or airplane expenses, then you (the employee) must submit the documents that support these deductions in accordance with the rules for the deductions.
Failure Is Not an Option
If you, the owner-employee, fail to submit adequate proof, your corporation must include the expense reimbursements in your W-2. Incorrect treatment can cause payroll tax penalties, such as the attention-getting 100 percent trust fund penalty.
With proper proof, your corporation gets the tax deduction for what it reimburses you. You, the owner-employer who receives the reimbursement, have no taxable income.
To offer an accountable plan, an employer must comply with three standards:
- The expenses must have a business connection;
- The expenses must be substantiated within a reasonable period; and
- The employee must return any money not spent to the employer, also within a reasonable period.
If any of the three conditions isn't met, the reimbursement arrangement is treated as a nonaccountable plan. In other words, the reimbursements are taxable compensation to the employee and subject to employment taxes.
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partnership rules if expenses are incurred for it
You can deduct unreimbursed partnership expenses (UPE) if you were required to pay partnership expenses personally under the partnership agreement.
Don’t include any expenses you can deduct as an itemized deduction.
Don’t combine these expenses with — or net them against — any other amounts from the partnership. You can’t deduct unreimbursed expenses if you weren’t required to pay them under the partnership agreement.
Also, deductible UPE will reduce your self-employment income.
there is a link in Turbptax where if qualified you would enter the UPE for the vehicle.
