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We have a landscaping business with one truck that has both

business/personal use. To keep...
We have a landscaping business with one truck that has both business/personal use. To keep things simple I log mileage used for the business and take that deduction for fuel costs. My question is regarding the method of payment at the pump. For example, lets say that we use the truck for 250 miles in a given week for the business. As far as personal use, it can range from 75 miles used to travel to another workplace upwards to whatever(vacation etc.) When it comes time to pay at the pump how do we separate business/personal use? Obviously there will be times when the truck is out of gas due to business use and or personal use with possibly both mixed in. Who pays? Please help!
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Answered in 1 minute by:
9/10/2013
Lane
Lane, JD, CFP, MBA, CRPS
Category: Finance
Satisfied Customers: 12,847
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
Verified

Lane :

Hi,

Customer:

hello

Lane :

YOu can use two different methods fr deducting the business use of the truct ... the stabndard mileage rate or Actual cost

Lane :

By FAR, in my opinion using the milesage rate I think it's 55 cents per mile)

Lane :

(ill llkok that up for you in a minut) is the easiest and cleanest

Customer:

I understand that part...however, when it comes time to actually pay at the pump who pays for the gas...the individual or the business

Lane :

It has the depreciation and all built into it ... and all you have to do is keep a mileage log

Lane :

The stabndard rate is making an assumption nregarding gas cost

Lane :

as long as you know how many mile you used for business, that's where you get the deduction for gas (and other costs)

Lane :

Do a little math an you'll see that you're getting a whole lot more than the cost of the gas in there

Lane :

itthe standard mileage deduction accounts for gas, wear and tear, eventual new tires, etc

Customer:

Oh so if you use std ded you cant deduct the cost for say new brakes, rotors, etc..?

Lane :

If you use the actual cost nmethod, thjen you've just go to write it all doen, depreciate the trust know how many mile you used for business and then do the m ultiplication to see how much of that gas money you spent throughout the year was for business, etc

Lane :

(sorry for the typos) but yes that's right

Lane :

you either have to keep meticulous record on ALL of that stuff, brakes maintenance actual gas cost, etc

Lane :

OR

Lane :

standard mileage deduction

Lane :

Here we go:


Beginning on Jan. 1, 2013, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:



  • 56.5 cents per mile for business miles driven.

  • 24 cents per mile driven for medical or moving purposes.

  • 14 cents per mile driven in service of charitable organizations.

Customer:

so when it comes time to actually pay for the new brakes the business should still pay for it, correct?

Customer:

and the cost of maintenance should balance out using std mileage

Lane :

yep

Lane :

for a really old truck in need of repair, the thinking is that you're making up in the depreciation that's built into the rate for what you're paying out of pocket... and on a new trusk, its the other way around.

Lane :

From there:

Lane :


Car Expenses





If you use your car for business purposes, you ordinarily can deduct car expenses. You generally can use one of the two following methods to figure your deductible expenses.





  • Standard mileage rate.




  • Actual car expenses.





 


If you use actual expenses to figure your deduction for a car you lease, there are rules that affect the amount of your lease payments you can deduct. See Leasing a Car , later.


 

Customer:

there are times when the truck needs gas and has been used for both personal/business during that tank. Who pays for the gas at that fill up

Customer:

that is really more of what I am stumped on

Lane :

The business owner always pays for everything up front the does one of two things (hang with me here) ...

Lane :

Take the business mileage % of the total mileage for the year and multiply that (say 50%) time all real costs ...gas, repair, brakes, etc

Lane :

OR

Lane :

multilpies the NUMBER of miles times the 56.5 cents

Lane :

make sense?

Customer:

sort of..

Customer:

ha

Lane :

if you drove 15000 mile in 2013 and 10,000 of this were for business, then you multiply .67 times all real costs for the deduction OR multiply 10,000 x 56.5 cents

Customer:

I guess what I'm trying to say is that I am in business with one other guy(it's his truck) and I would like to get the best deduction possible...but also I don't want to pay for say his trip to the beach

Lane :

you not going to lke this one, but what you probably SHOULD do is run it both ways... keep up with everything you paid out of pocket (and that will take some recordkeeping on the gas) ...AND ... keept a mileage log ... and see which one nets the better deduction

Customer:

To me...if the business pays for all the gas in the truck at every fill up and we keep a log for the business use he will owe money back to the business for gas spent on personal use. Or it would mess up the cash flow

Lane :

Well, someone's going to need to (ought to) take the deduction ... it sounds like, in your situation, that you guys ought to just keep p with what you actually pay for and deduct it

Lane :

when there's that kind of overlap, its fair and it's legal onlye real busines 9ACTUAL) costs are deducted and he who pays takes the deduction

Lane :

Tachnicall if you are a partnership...you're supposed to be doing a partnership return that then distributes the income and expenses , based on either a written agreement OR percentage of ownership, then taking that to your own return

Lane :

But you could also look at this as both of you being sole proprietors, and doing your own schedule C (which is where you write your business income and expenses) and it flows to line 12 (business income or loss) to your personal return

Customer:

we are an llc filing as an scorp so theres the flowthrough

Lane :

OK then you do an 1120 to list all of the income and expense and then get a k-1 to do your taxes

Customer:

im wondering if, since it's his truck if he should pay for all gas receipts regarding the truck upfront and then get a mileage based reimbursement from the bus

Customer:

does that sound like it would reflect accuracy and fairness?

Lane :

YEP, THAT works ... then you just need to decide whether the business is going to use actual cost or mileage and do it on the 1120 (s_corp tax return) to take the deduction

Lane :

and the income of loss that flow FROM EVERYTHING, the auto expenses included flows to you k-1s 50/50 I'm guessing

Customer:

right

Customer:

we have a family mechanic so we catch a break there...we will probably take the mileage :)

Lane :

sounds like you've got your arms around it AND if you really keep ALL the receipts, you can decide at tax time which methood creates the bigger dedution\woops beat me to it

Lane :

yep, mileage will probably be the best

Lane :

you got it :)

Customer:

so I should just do a mileage based reimbursement for him every payroll period?

Lane :

that would make sense, especially if you're already crunching some numbers at that time, keeps the cash flow even for him

Customer:

Thank you very much for your help...I knew I could wrap my head around it if I had someone to talk to besides myself lol

Lane :

That's what we're here for! (works that way a lot, actually)

Lane :

YW

Customer:

have a good day!

Lane :

If this HAS helped, I would appreciate a feedback rating of 3 (OK) or better … That's the only way they will pay us here.


HOWEVER, if you need more on this, PLEASE COME BACK here, so you won't be charged for another question.

Lane :

you too!

Customer:

will do

Customer:

thank you very much

Lane
Lane, JD, CFP, MBA, CRPS
Category: Finance
Satisfied Customers: 12,847
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
Verified
Lane and 87 other Finance Specialists are ready to help you
Ask your own question now

Thanks much for everything Greg!

If you’d like to work with me again, just say “For Lane only …” at the beginning of your question, and I’ll get the alert.

Thanks again,

Lane

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Lane
Lane
Lane, JD, CFP, MBA, CRPS
Category: Finance
Satisfied Customers: 12,847
12,847 Satisfied Customers
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986

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