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Emilee Weaver
Emilee Weaver, Certified Public Accountant (CPA)
Category: Finance
Satisfied Customers: 29
Experience:  VP, Director of Finance
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I started a single-member LLC in California in 2015. It has

Customer Question

Hello, I started a single-member LLC in California in 2015. It has only made about 60k or so thus far and will likely add up to about 100k+ by end of year. I would like to lease a vehicle for my business that will be split between personal and business use (probably 50% business and 50% personal usage). The business usage will be primarily to a secondary office location (my primary is in my home) as well as client visits and coffee shop visits and random errands for the business. Business use percentage will fluctuate over time, some months being more heavy, other months being less heavy but probably not dropping below 50% business usage. I believe I can deduct half of the lease payment in that scenario. My business obviously cannot qualify for the lease with such low income so far. So it will be based against my credit and so on. But I will pay the vehicle out of the business accounts. Am I in a good position to lease a vehicle for the business? Or are there gotchas or considerations that I need to be aware of? Thank you.
Submitted: 6 months ago.
Category: Finance
Expert:  Emilee Weaver replied 6 months ago.
There are several things that you want to consider in this scenario. First, the IRS is a bit particular about writing off vehicle expenses, so you need to keep a log of your exact mileage for business. You can pick up a log book at your local office supply store or on Amazon. If you were audited a rough guesstimate of what % is personal versus business is not going to suffice so you must keep good records of the actual business miles.Secondly, it is important to note that the drive from your home to your office is considered your commute by the IRS and is NOT considered business use of the vehicle. So that mileage should not be included in your business mileage ( and should not be estimated as part of your business use in making this decision)Lastly, you may want to do some math on deducting your actual expenses versus the standard mileage rate. The mileage rate for 2016 is 54 cents for every mile driven. The company could reimburse you personally at this rate for every business mile driven. You may find that this $ amount is higher than taking your actual vehicle expenses times the % of business use, so just something to consider as you review this. It might make more sense to pay the lease out of your personal account and have the business either reimburse you for mileage or a % of the actual costs. ( and either way you must keep a log!)Hope that this helps in your decision making.Emilee Weaver, CPA
Customer: replied 6 months ago.
Thank you. This information is very helpful and raises a question I'm confused about. I was previously told that as long as my principle place of business was my home, I could deduct mileage from my home to a secondary location (a co-working space, which is basically just a part-time office that I use to help change my work atmosphere a couple days a week and to meet with clients very occasionally). Is this accurate, or was I ill-informed?Also, it sounds like you may be more in favor overall of leasing the vehicle personally. Does it raise my chances of an audit if I lease a vehicle through the business? I don't have anything to fear from an audit other than the hassle and expense. But if this is hot-button territory, it's probably good to know.Thank you again. Very much appreciated.George
Expert:  Emilee Weaver replied 6 months ago.
Your home office will qualify as your principal place of business
 if it is the place where you earn most of your income or perform the administrative or management tasks for your practice. If the second location is a few times a week, I could see this as debatable by the IRS. ( That said, I don't specialize in personal income taxes, so I would ask this again to whoever prepares yours and get their thoughts - specifically let them know how much of your business is done from the other location). In general if your home is the primary place of your business, then the trip to a second business location ( your co-working space) should be deductible. So, I don't think they are misinformed, it just might be a grey area depending on ow much work you do at the other space.Logistically, I don't think that it raises any more red flags whether you personally pay for the lease or the business. It's just that it is often easier for the business to reimburse you for business expense than you reimbursing the company for a personal expense. If you do pay for it through the business just make sure that you are still tracking your personal use versus business.

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