Depending on the industry you serve, it may or may not be worthwhile to use your vehicle for business purposes. However, cars are expensive to own and maintain, and using them for business reasons can also introduce unforeseen costs and risks.
You should know a handful of things before deciding to use your car for business. It’s important to understand the items listed below to ensure you’re following the law and protecting yourself while operating a vehicle for any work-related purpose.
Below, we’ll explore what you need to know if you’re interested in using your car for work-related tasks, such as meeting clients, delivering products, or driving to your company locations.
Before Using a Vehicle for Your Home Business
More people are starting their businesses from home, especially during the ongoing COVID-19 pandemic. The pandemic unleashed an influx of entrepreneurs looking to form startups. Startups play a key role in job growth, economic resiliency, and innovation.
Regardless of what products you sell or services you provide to customers, you may think using your vehicle will help your business thrive. You can deliver products using your car, meet potential customers, or perform consultations at a customer’s home.
There are many reasons you feel inclined to use your personal vehicle for business purposes, but keep in mind that being financially secure is absolutely critical.
Below, we’ll discuss what you need to know about using your car for your business and what to consider before doing so.
1. Purchase Commercial Auto Insurance
It would help if you looked into your existing insurance plan if you’re looking to use your vehicle for any work-related purposes. You may need to discuss with your insurance provider that you plan on using it for business, and they’ll likely advise you to purchase commercial auto insurance.
Oftentimes, you can bundle your personal and commercial policies to save money on both. It’s so vital to purchase commercial insurance, so that you’re protected. Suppose you get into an accident. In that case, any expenses that are incurred due to injury or death will be covered through your insurance plan. It’s not worth the risk to only use personal auto insurance if you’re truly using your vehicle for business purposes.
2. Take Advantage of Tax Deductions
Thankfully, the Internal Revenue Service (IRS) allows certain business expenses to be written off on your tax return. Here are some expenses you can consider writing off:
- License and registration fees
- Car insurance
- Gas/oil costs
- Leasing costs
- Repairs and general maintenance
- Interest on money borrowed to purchase the vehicle
It may even be possible to deduct any parking fees for when you need to park in a parking garage or on a city street. For more information on how to maximize your tax return deductions for your business vehicle, TurboTax has a webpage with plenty of tips and tricks.
3. Maintain Your Vehicle and Keep It Organized
If you want to use your vehicle for work, you need to keep it well-maintained and organized. While you may be the only one using the car, it’s important to ensure it’s running properly and the interior is not cluttered with trash or unnecessary items.
Organizing your vehicle is a matter of professionalism, and if you choose not to keep it organized, it can negatively affect your brand’s image in the eyes of your customers.
4. Keep a Paper Trail
You must record the mileage you incur when traveling for business purposes. You must find a way to track your mileage and ensure you’re following it accurately. If you fail to track your mileage, you could be missing out on a significant tax deduction or even risk getting audited.
There are a couple of ways to track your mileage, including:
- Using a mileage app, such as MileIQ or SherpaShare
- A logbook method
For the logbook method, you must record information about your trips the moment you complete them. Include specific details such as who you’re meeting, why you’re meeting them, and how many miles you drive to and from your destination.
It’s also worth noting that you cannot deduct mileage for personal reasons — for example, suppose you use your car 60% of the time for business purposes. You can only deduct 60% of your driving expenses for that year.
Take Steps Before Using Your Vehicle for Business Purposes
The tips listed above will help prepare you for driving a personal car for your business. It can be much easier than purchasing a company vehicle. Still, it does come with some drawbacks, such as buying commercial auto insurance. It’s always suggested that you talk to your insurance provider if you have any other questions about using your vehicles to operate your business.