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About John Stancil, CPA
Expertise
I can answer questions on personal income taxes, partnerships, and some corporate income taxes. I can deal with some state tax questions. Limited gift and estate tax questions. I am also familiar with ministerial and church tax reporting issues. I teach tax and accounting at a small church-related college. Sales taxes and property taxes are state and local issues so I am not likely be be able to give you an in depth answer on those types of taxes. I have maintained a part time tax practice for over 30 years. I am a member of the AICPA, National Society of Tax Professionals, and the Institute of Management Accountants.
Experience
I hold a doctorate in Accounting, and four professional certifications: CPA, CMA, CFM, and CIA. I passed all certification examinations on the first attempt, and received honorable mention for my scores on the CIA exam. I write a monthly tax column for the local newspaper.
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You are here: Experts > Business > Corporate Law > Tax Law (Questions About Taxes) > Tax deduction for small business vehicle
Expert: John Stancil, CPA
Date: 8/29/2008
Subject: Tax deduction for small business vehicle
Question
QUESTION: Hello John. I plan to start a personal chef business in the next few months. I will be making heat-and-eat dinners that will be delivered to clients. I need to purchase a new vehicle so that I will have ample room for a few Igloo coolers containing the entrees.
Is it more beneficial tax wise to get a CDL driver's license?
What, if any, types of vehicles would qualify/maximize for a tax deduction (for example, a minivan vs the Mustang I currently own)?
By the way, my Dad wants to invest. If I start up as LLC, would his investments be 100% tax deductible?
Thank you so much for your help.
ANSWER: Sandy
Thanks for your question.
Getting a CDL is not a factor for income taxes. It is a matter of state law.
Any vehicle over 6,000 pounds would be more advantageous from a tax standpoint as it is not subject to the depreciation limits oof Section 280. However, such a vehicle generally costs more to purchase and is not generally very fuel efficient.
Investments are not deductible. Gains from the investment are taxable, losses are deductible.
Hope this helps.
John Stancil, CPA
---------- FOLLOW-UP ----------
QUESTION: Yes John, this helps tremendously. Thank you very much!
May I just ask you just one more question. What type of incorporation(s) would lend my Dad's investment as tax deductible and be beneficial for me as a sole proprietor?
ANSWER: I am not sure what you mean by "what type of incorporations." Basically you receive a corporate charter from your state. You can elect to be taxed as a S Corp, which means the profits are taxed to the owners, and the business does not pay income tax. If you do not make that election, the corporation files a return and pays tax. The owners would then pay tax on any dividends the corporation paid.
If you are a sole proprietor you are not a corporation and your father could only be a lender, not an owner. He would be lending it to you personally, not to the business.
Hope this helps.
John Stancil, CPA
---------- FOLLOW-UP ----------
QUESTION: I'm so sorry for not being clearer and thank you for your patience. I want to incorporate my business in order that my Dad can invest in it to receive a (hopefully) 100% tax deduction. i.e. what type of incorporation would I need to set up in order for my father to receive a tax deduction for his investment in my company. Thank you very much for this hard to get information!
Answer
As I said earlier, you cannot get a tax deduction for an investment. When the investment makes a gain and pays a dividend you pay tax on the dividend. If it is an S Corporation, the owners pay tax on the profit and can deduct losses.
When you sell the investment, you take a gain or loss on the sale, but you do not get a deduction when you make the investment.
John Stancil, CPA
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