What Business Deductions Can I Take From A Car Purchase? Also Net-Operating Loss

[MrMonkeyMoustache]

Own a business, bought a new car so that I could travel to and from it with no issues. Wondering if the taxes and fees associated with the purchase could be considered business expenses, since the per-mile business use was about 33%. I know the exact mileage I drove for business-related things, and I know the standard deduction of 54 cents/mile is better than the actual expenses. My question is more about the fees and interest associated with the purchase of the car.

It's a sole proprietorship LLC, so it receives pass-through taxation.

I also had a NOL last year, don't really remember the amount, and not really sure how I'd roll it over into this year or find out the amount. Would an IRS tax transcript tell me?

[jwright]

If you take the standard mileage deduction, loan interest, registration fees, and tolls or parking fees are still deductible as actual expenses.  Fees paid to purchase the car would not be, that would fall in with the cost basis to be depreciated if you chose to use actual expenses.

The NOL should be on your prior year tax return.  You would need a copy of the actual return; I don't believe the transcript would give you all the information you need to do the NOL calculation.

[MrMonkeyMoustache]

If you take the standard mileage deduction, loan interest, registration fees, and tolls or parking fees are still deductible as actual expenses.  Fees paid to purchase the car would not be, that would fall in with the cost basis to be depreciated if you chose to use actual expenses.

The NOL should be on your prior year tax return.  You would need a copy of the actual return; I don't believe the transcript would give you all the information you need to do the NOL calculation.

Gotcha, so just the loan interest and registration fees. And, yes, just wasn't sure if the tax transcript would show it.

[CareCPA]

Also keep in mind regular commuting between your home and main business office is not a deductible expense. Only relevant for employees.

ETA: Any expenses you are deducting (interest, etc) need to be allocated between business use and personal use. Obviously only the business use percentage is deductible.

[MrMonkeyMoustache]

Also keep in mind regular commuting between your home and main business office is not a deductible expense.

ETA: Any expenses you are deducting (interest, etc) need to be allocated between business use and personal use. Obviously only the business use percentage is deductible.

Yes, as I understand it, if it was used for business purposes 33% of the time, 33% of the interest and registration fees would be deductible, correct?

And I did not know that commuting to the office was non deductible. It was a good 50-mile round-trip 3 days/week. It was a gym and personal training business, so I had to be in-person to actually do the job. Would that be deductible?

[CareCPA]

Sorry, I was thinking you were an employee and forgot you were a SMLLC. Ignore the part on commuting and I will strike it from my original comment.

And yes to the 33% deductible.

[MrMonkeyMoustache]

Sorry, I was thinking you were an employee and forgot you were a SMLLC. Ignore the part on commuting and I will strike it from my original comment.

And yes to the 33% deductible.

Gotcha, thanks for the replies.

[CareCPA]

Sorry, I was thinking you were an employee and forgot you were a SMLLC. Ignore the part on commuting and I will strike it from my original comment.

And yes to the 33% deductible.

Gotcha, thanks for the replies.

I'm sorry, I retract my retraction. You should read:
https://www.irs.gov/pub/irs-pdf/p334.pdf
Page 32 discusses vehicles and states "You cannot deduct the costs of driving your car or truck between your home and your main or regular workplace. These costs are personal commuting expenses."

[SeattleCPA]

I also had a NOL last year, don't really remember the amount, and not really sure how I'd roll it over into this year or find out the amount. Would an IRS tax transcript tell me?

Your 2015 NOL was supposed to be carried back to 2013 and 2014 (which would have generated a refund or refunds) unless you elected to forego the carryback period.

You might want to check on this ASAP in case you're at risk of losing your ability to use the NOL... that's a good deduction because it'll shelter any other kind of income.

[MrMonkeyMoustache]

Sorry, I was thinking you were an employee and forgot you were a SMLLC. Ignore the part on commuting and I will strike it from my original comment.

And yes to the 33% deductible.

Gotcha, thanks for the replies.

I'm sorry, I retract my retraction. You should read:
https://www.irs.gov/pub/irs-pdf/p334.pdf
Page 32 discusses vehicles and states "You cannot deduct the costs of driving your car or truck between your home and your main or regular workplace. These costs are personal commuting expenses."

Thanks, good stuff.

Also, another thing I'm wondering is what deductions apply under the EITC? Since I'm a SMLLC, would my business deductions lower my AGI, putting me under the $14,880 and giving me the credit?

Trying to take advantage as much as I can (as everyone should). I'm 23, if that matters.

[MrMonkeyMoustache]

I also had a NOL last year, don't really remember the amount, and not really sure how I'd roll it over into this year or find out the amount. Would an IRS tax transcript tell me?

Your 2015 NOL was supposed to be carried back to 2013 and 2014 (which would have generated a refund or refunds) unless you elected to forego the carryback period.

You might want to check on this ASAP in case you're at risk of losing your ability to use the NOL... that's a good deduction because it'll shelter any other kind of income.

I elected to forego the carry back period with an exception.

[MrMonkeyMoustache]

Also, does it matter regarding deducting commute expenses if my business is not my primary source of income?

[SeattleCPA]

Commuting is getting you from your home to your first work location... and then from your last work location back home.

If you, therefore, (a) drive from home to employer, (b) from employer to business, (c) from business to employer, and then (d) from employer back home, only (a) and (d) represent commuting... (b) and (c) count as travel.

I kind of hesitate to say this, because some people will overreact to this and go ape... but I may as well say it... You can work the commuting rules to get more business miles sometimes. E.g., what if in your business, your first work location is your home office and your last work location is your home office.

By the way, I don't mean this "wink-wink, nudge-nudge"... I mean you really, really do run your business this way. In this special situation, your commuting and business miles maybe look like this...

You grab a cup of hot french roast in the kitchen and (a) commute from the kitchen to your home office, then (b) from your home office to client, then (c) from your client back from your home office, and finally (d) from your home office to the kitchen where you grab a IPA from the fridge.

In this case, I think (a) and (d) count as your commutes and (b) and (c) count as travel.

[MrMonkeyMoustache]

So, if I went from home to work, work to business, business to home, work to business would count as travel? That's was always my schedule.

[SeattleCPA]

Yes, that's it.

[BlueLesPaul]

Commuting is getting you from your home to your first work location... and then from your last work location back home.

If you, therefore, (a) drive from home to employer, (b) from employer to business, (c) from business to employer, and then (d) from employer back home, only (a) and (d) represent commuting... (b) and (c) count as travel.

I kind of hesitate to say this, because some people will overreact to this and go ape... but I may as well say it... You can work the commuting rules to get more business miles sometimes. E.g., what if in your business, your first work location is your home office and your last work location is your home office.

By the way, I don't mean this "wink-wink, nudge-nudge"... I mean you really, really do run your business this way. In this special situation, your commuting and business miles maybe look like this...

You grab a cup of hot french roast in the kitchen and (a) commute from the kitchen to your home office, then (b) from your home office to client, then (c) from your client back from your home office, and finally (d) from your home office to the kitchen where you grab a IPA from the fridge.

In this case, I think (a) and (d) count as your commutes and (b) and (c) count as travel.

So, if I went from home to work, work to business, business to home, work to business would count as travel? That's was always my schedule.

Yes, that's it.

One small thing that i did not see address (but perhaps I missed it), the home office must be the principal place of business within the meaning of Code §280A(c)(1)(A) and the other location must be a work location in the same trade or business (which would include visiting a client) in order to deduct the cost of travel between the two.  Rev. Rul. 997, 19991 CB 361.

[SeattleCPA]

Commuting is getting you from your home to your first work location... and then from your last work location back home.

If you, therefore, (a) drive from home to employer, (b) from employer to business, (c) from business to employer, and then (d) from employer back home, only (a) and (d) represent commuting... (b) and (c) count as travel.

I kind of hesitate to say this, because some people will overreact to this and go ape... but I may as well say it... You can work the commuting rules to get more business miles sometimes. E.g., what if in your business, your first work location is your home office and your last work location is your home office.

By the way, I don't mean this "wink-wink, nudge-nudge"... I mean you really, really do run your business this way. In this special situation, your commuting and business miles maybe look like this...

You grab a cup of hot french roast in the kitchen and (a) commute from the kitchen to your home office, then (b) from your home office to client, then (c) from your client back from your home office, and finally (d) from your home office to the kitchen where you grab a IPA from the fridge.

In this case, I think (a) and (d) count as your commutes and (b) and (c) count as travel.

So, if I went from home to work, work to business, business to home, work to business would count as travel? That's was always my schedule.

Yes, that's it.

One small thing that i did not see address (but perhaps I missed it), the home office must be the principal place of business within the meaning of Code §280A(c)(1)(A) and the other location must be a work location in the same trade or business (which would include visiting a client) in order to deduct the cost of travel between the two.  Rev. Rul. 997, 19991 CB 361.

I tried to write my original answer to cover what you're pointing to... but at the very least I wasn't effective at communicating and maybe even was so sloppy as to be misleading. Sorry. Ugh. :-(

It would not be a bad idea for someone really interested in maximizing their travel or transportation expense deduction to read the actual revenue ruling, which is available here:

https://www.irs.gov/pub/irs-drop/rr-99-7.pdf