(light instrumental music)
- [Toby] I purchased another vehicle,
I like the way they say another vehicle,
for business purposes.
Do I need to title it in the name of the business?
Jeff, you like this stuff.
- [Jeff] No, we're not going to,
we recommend that you not title it in the business name.
For a couple reasons.
Liability for one, it presents additional liability
to the company, to your business,
and second, it's a little more expensive
to put it in your company.
You may find that interest rates are higher
if you're getting loans on the car.
And commercial insurance on the auto
is definitely going to be higher than personal insurance.
- [Toby] Yeah, because, in theory,
again if you're in a business, anybody in that business
can go hop right in and drive that car around.
And you're also, whenever you're doing business,
now you're liable for anything that happens in it.
So just by the nature of it, it's now a business asset,
so the business is exposed, plus you're exposed.
Two people to defend equals more money.
So it's more expensive.
- [Jeff] Well and I think sometimes we forget
that we're using that car on non-business hours.
And we get in a wreck or something,
it's still a business vehicle.
- [Man] Ooh, alright so here's our deal.
Taxable, personal use.
So let's say that you're spending $50,000 on a car.
And you're using it 50% for business.
First off, that's a problem.
You have to use it more than 50% for business
in order, or is it right at 50?
- [Jeff] I think it's right at 50.
- [Toby] If you're going to write that thing off,
it's very easy for the IRS to come in and say
we think that that was actually dis-allowable deduction
'cause it wasn't being used for more than 50%.
Now this isn't something where you just say it's 50%.
You have to track this and prove
that you used it more than 50%.
Otherwise, no deduction.
Zero, zilch.
It is actually a personal asset.
And now you're being thwarted.
And if you took a deduction, they make you claim that
as taxable income.
- [Jeff] Yes they do.
- [Toby] Which is very bad.
But here's the other side.
Depending on the value of the vehicle,
the IRS has a cool layout,
what do they call that thing?
It's a...
The schedule of how much taxable income you have to include
in your return every year for that vehicle
based on its price.
So if it's 50,000 you're going to be paying,
I think it's close to 10,000 that you're going to have to claim
if you use it for personal use.
That's 100% personal use.
So if you're using it 50/50,
you may have $5,000 taxable to you.
Versus, what's the alternative?
- [Jeff] You have a personal vehicle in your name
and you're reimbursed under an accountable plan
for the mileage taken,
is the easiest way I can see doing it.
- [Toby] Yeah, mileage is just 54.5 cents a mile.
And I should say business mile.
And the easiest way to track that
is something called Mile IQ.
Easy app, you can just go on
if you have an Apple or Android phone.
It'll GPS you.
So you just say, I think you swipe right for business,
swipe left for personal.
Whatever it is.
It's one of those types of apps where you're swiping.
And you just say hey, this was a business trip,
this was a personal trip, and it tracks it for you.
And at the end of the year you just say,
here's the amount of miles and the company cuts you a check
and you don't have to report it personally.
And the company writes it off as an expense.
That's typically our recommendation.
There are exceptions.
And you know, the reason that we say this is our typical,
is because you better show me there's a really good reason
to have the business vehicle.
So maybe you have a construction company
where you have some trucks or something like that.
- [Jeff] Right.
- [Toby] Then maybe, but otherwise,
if it's just your family car and you're just,
you know, you're running around doing some
real estate business or an MLM or something,
you got to be really careful with this.
There's a lot of people that have gotten burned on this one.
And then once it's in the business,
it's kind of a pain to get it out.
- [Jeff] Yes.
- [Toby] It's not like you can just hand it to yourself
and say congratulations, here's a bonus.
That's taxable to you.
That fair market value gets hit.
So I tend to be with Jeff.
I like to see it in your personal name
'cause it's cheaper, in the long run
you're getting a lot more benefit.
My commercial insurance, I've done this before,
was almost twice as much.
It always depends a little bit.
(light music)
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