NASE News

Advertising Deduction on Vehicle

Q:  I have started a small business selling weight loss supplements and I am considering adding little magnet signs to the side of my car.  If I choose to do this will the full cost of my car now be considered advertising?

A:  Investing in your new business via advertising is certainly a good idea and the costs you incur will certainly be deductible.  Unfortunately, the addition of the advertising sign to your vehicle will not change the character of the vehicle itself, nor will it change the deduction for the business use of that car.  Perhaps the bigger concern is to make sure that you indeed maximize the deduction to which you are entitled.

You may already know that there are two methods for determining the business use of your car, the actual expense method and the standard mileage rate method.  The first requires that you keep track of all costs incurred in maintaining that vehicle and then allocating those costs based on the business miles you drove as a percentage of the total miles that you drove.  The standard mileage rate simply takes the total business miles that you drove and applies a standard rate per mile provided by the IRS to arrive at the deduction.

The one common factor between the two methods is that you must keep track of the business miles that you drive.  Most small business owners are less than diligent at keeping track of those miles and therefore, most likely understate the deduction.  So in addition to the sign on your car, make sure that you keep track of all the miles you drive.  You can buy a simple spiral notebook or journal that you keep on the passenger seat or you can utilize one of hundreds of smart phone apps and electronic solutions to help with the process.   Regardless of which works best for you, make a commitment to keeping track of the miles that you drive. At the end of the year, you will be surprised at the number of miles you put on your car as a new small business owner.

The IRS has a great publication to help you with the detail called Publication 463, Travel, Entertainment, Gift, and Car Expenses that you can download for free from the IRS website at www.IRS.gov

As always, don’t forget that you are not alone. Bookmark our website at NASE.org as well as the IRS website at IRS.gov and you will always be able to find the help you need.