Vehicle Deductions?

Question

I'm going to be managing my first property as soon as I can get an offer accepted.  My plan is to buy a quad, owner occupy, and I'm going to skip the LLC because I don't see it really providing much in the way of benefits for my situation.

So here's the thing: since I'll be managing, I'm probably going to need some sort of beater/$3000 truck/wagon/van, since my BMW sedan is probably not going to be able to carry much stuff.  I also really don't want to screw it up by carrying around tools, lawnmower, appliances, etc.  I suppose I could rent a truck when I've got to move stuff, but its always a pain and I'd be back to needing to worry about dirtying it up again.

Is it possible to deduct a "business expense" like a truck even if I don't have a separate business/corporation setup?  I know this might be a dumb question, but I've never filed anything other than a 1040EZ before.

Pat L. · Answer

Here ya go... I love this site & we have always 100% deducted our business SUV/Trucks against income using this great little Tax advantage, but we also own a LOT of properties & do/manage ALL the work/repairs/maintenance ourselves. But as soon as you own a Truck along comes the need for a trailer WITH a ramp & then you have friends come out of the woodwork asking to borrow it all.

https://www.section179.org/

David Krulac · Answer

Matt Rothwell

yes Not is the essential word.  People don't know years of cars, or relative values, but they do know high priced name tags.

Once we went to look at some property for sale FSBO and I drove a Porsche.   The seller thought it was a real expensive car even had a car phone (this was in the days before cell phone everywhere).  The seller even asked if I would throw in the Porsche to the deal.
Little did he know it was an older Porsche, not real valuable and I had gotten it at a US Marshall's Sale.

IMHO your rental property vehicle should be on par or less than the vehicles that your tenants drive, but never more.  They will think that if you have an expensive car that they paid for it with their rent.

I've had tenants say, "well you make all that money from rent".  They think that all rent goes in my pocket, when a bunch goes to pay mortgage, taxes, insurance, utilities and other expenses.  I tell them a lot of money comes in but a lot of money also goes out.

Troy Fisher · Answer

The home depot truck is $70/day. I'd think it would be better to rent that truck than have to purchase a 2nd vehicle.  Registration, insurance, would seem to be more than it is worth to have a vehicle just in case.

Of course, free shipping from home depot is even better!

Steven Hamilton II · Answer

Matt Rothwell,

Of course you can. You do not need a corporation or LLC in order to take the deduction.  You can either use the mileage rate (often the better option) however, if you are not putting that many miles on it, you may be better depreciating the vehicle and taking your actual expenses.

Also, depending upon your AGI you may want to look into Cost Segregation.

Most times mileage rate is better.

Feel free to ask if you have any other questions.

-Steven

Steven Hamilton II · Answer

I don't typically recommend it; however, it is an option when taking actual expenses. But keep in mind you cannot switch between the two.

Peter Sosnow · Answer

@Steven Hamilton II.  Can you deduct the car lease instead of the mileage?

Eric Ducommun · Answer

This is exactly what I did! I purchased a $2,000 work truck, which allowed for an immediate safe harbor deduction. I can continue to expense gas and maintenance on the vehicle beyond the current fiscal year. This work truck inside the LLC greatly streamlines my accounting as well as provides a tax advantage for business related mileage. I've done two YouTube videos on the topic, which you can find by linking my profile or searching YouTube for #ducommunproperties.

Matt Rothwell · Answer

I'm assuming you mean that you wouldn't? Or you would?

This is also the kind of thing I'm a bit worried about.  If tenants think I'm "rich" because I drive a "fancy BMW" (Its not really that nice, its a 2006 325i with 120,000 miles on it), I think that'll work to my disadvantage.

Roy N. · Answer

Matt Rothwell

Matt, I ditched my truck as it was proving to be not cost effective.  I have a small 5'x8' manual dump trailer (1500lb load) and put a hitch on the Jetta diesel wagon.

I've gutted apartments and lugged all the debris to the C&D landfill.  The trailer is actually better for carrying drywall, plywood, lumber than the box of the truck was (wheels are outside the box and it has a drop axle).

If we are getting a lot of material (2 lifts of drywall last week), then the supply places all deliver for free.

Here in Canada, the CRA has some "peculiar" rules around vehicle deductions and rental income.  For example, I can claim mileage for travel to my residential properties to carry out maintenance or renovations, but not to collect rent (or serve notices).

David Krulac · Answer

Matt Rothwell

Home Depot, Lowes and appliance places deliver, even used appliance places deliver.  Some people get a small trailer and a hitch for the car.  One investor I know has a Benz with a trailer hitch, owns properties in half dozen locations and doesn't have a truck, even though doing rehabs.

I would drive to tenant properties in a high priced luxury car, but that's just me.

One method of deducting a vehicle is a mileage log.  you need to be detailed and should have an entry for every day of use, where you went, and what you did.  And if you claim 100% usage for the vehicle, you better not ever use it for personal use, even when the Beemer is in the garage, or you get tripped up in an audit.

Vehicle Deductions?

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