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Tax Law (Questions About Taxes)/Car Shared between Two Businesses and Personal Use

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Question
John,

Thank you for taking the time to volunteer your services.  I have a question about deducting car expenses/depreciation on a Schedule C for my personal tax return.  I have been deducting depreciation and other car expenses using the Actual Expense Method for a small sole-proprietor business as a musician for the last four or five years (since the car was new).  I have started a second business this year doing consulting services.  I use the same car to do this work.  I should note that I also use the car for personal use.

Can I begin using the Standard Mileage Method (X cents per mile) in my new consulting business or since I used the Actual Expense method in my music business am I locked in to that approach with this car?  

I don't think I qualify for a section 179 deduction as I don't believe I am using the car 50% or more for business use.

Thanks,

Paul

Answer
Paul,

Thanks for your question.

This gets somewhat complex.  I hope your reporting to this point has been correct.  You cannot use the standard mileage rate unless it was taken in the first year of business use.  So you can't switch.

At this point, you will need to allocate the miles between personal, business 1, and business 2.  Total all you auto expenses including depreciation. The allocate the total cost between the three, deducting the portion for business 1 on that Schedule C and the portion for business 2 on that Schedule C.

The IRS depreciation limit applies in total, not to each of the three uses.  For example, if the depreciation limit is $2,000 you would have to allocate that amount amount personal and the two businesses.

Hope this helps.

John Stancil, CPA

Tax Law (Questions About Taxes)

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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 am Professor Emeritus at Florida Southern 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 CPA practice, specializing in tax, for over 35 years. I am a member of the National Association of Tax Professionals, The Florida Insititute of CPA's, The NCPE Fellowship. In addition I am a Certified Mentor for SCORE. Visit my website at www.mybaldcpa.com. I also offer seminars and consultations to churches and clergy on their tax issues at www.churchtaxsolutions.com Also visit my blog, www.thetaxdocspot.com. I am listed on Tax Connections at https://www.taxconnections.com/profile/John-Stancil/12258973 Prepare and file your own taxes at www.1040stancilcpa.com

Experience

I hold a doctorate in Accounting, and am a CPA. My certifications of CIA, CFM, and CMA are inactive. I passed all certification examinations on the first attempt, and received honorable mention for my scores on the CIA exam. I have operated a CPA firm for over 37 years and have taught accounting and tax at the college level for over 35 years.

Organizations
FICPA, NATP, NCPE Fellowship, Lakeland Business Leaders

Publications
The CPA Journal, Florida CPA Today, Green Consumer, Green Business, Global Sustainability as a Business Imperative, Palmetto Review, NATP TaxPro Quarterly, Mustang Journal of Finance and Accounting.

Education/Credentials
DBA University of Memphis MBA University of Georgia BS in Accounting Mars Hill University

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