When purchasing a vehicle that you will use for personal and business-related driving, you may wonder whether you should register the car as an individual or business car.
If you decide to purchase the car under your company’s name, you can benefit from tax advantages. Whether you’re the business owner or an employee, you must contemplate the pros and cons before purchasing.
Buyers often have to consider various tax implications and additional factors when making their decision. Likely, you may not know all the benefits that come with putting your car under the company’s name. Here we take a closer look at the many advantages of doing this:
Taxes and Business Vehicles
One of the top benefits of putting your car under your business name is that you can enjoy claiming the cost of a brand new vehicle as an asset. In turn, you can lower a tax deduction for your business during tax season.
However, keep in mind that when putting a vehicle under your company name, it is requisitory for you to track mileage and how often you use it. It may become challenging if you’re someone who uses the car for personal use as well.
Moreover, before deciding that a tax deduction is an excellent benefit, make sure you’re adequately prepared to complete extensive paperwork that ensures the car remains a ‘company car.’
Another great pro of putting a car under your company’s name is that you can put the vehicle under your company’s auto policy as well. In this way, business owners and employees alike can save actual costs due to not paying more for personal auto coverage.
Plus, business auto coverage typically offers better and excellent coverage than personal coverage. Usually, if you put the car under your business’ name, you won’t have to worry about hitting a limit.
The fact is that most personal umbrella policies lack coverage for accidents occurring during business endeavors. Therefore, using your business’ auto insurance provides you coverage in case of accidents occurring during business expeditions.
However, before making a critical decision, make sure you have a proper and in-depth understanding of your brand’s auto insurance policy.
Employee Ownership of the Vehicle
The significant benefit of employee ownership of a car under the company’s name was eliminated in the 2017 Tax Cuts and Jobs Act from 2018 to 2025. Now employees can no longer enjoy a deduction on Schedule A.
Plus, the employee may also need to purchase a separate auto insurance policy to cover the car’s commercial use and potential damage.
On the flip side, employees can benefit from not paying running costs like petrol, repairs, maintenance, etc.
To Sum it Up
The factors mentioned above are also proper if you decide to lease a car for employee business use. However, if you lease a car, you won’t have much control over the mileage an employee puts on the vehicle.
Thus, it’s always a good idea to consider the legal and financial aspects of putting your car under the company name before making a final decision. For this reason, first-time buyers should consider contacting a professional lawyer to help them during this process. Expert lawyers will help you understand the advantages and drawbacks of putting your car under the company name.