When you have to drive for your job, you might prefer to use your car as opposed to a business vehicle. Whether you’re running errands for your boss, meeting with clients, picking up materials, or spreading the word about your company, you can take advantage of several perks of driving your vehicle for business purposes.
While company cars are available at some businesses, not every company can offer this kind of perk to its employees. Anytime you use your vehicle to run business-related errands, you have two options for reimbursement.
- Mileage deductions: If you choose to make deductions based on your mileage, you’ll have to keep track of how far you drive for all business uses. Remember, this does not include your commute to or from work. You can choose to do this manually on a log you keep in your car, or download an app that tracks your trips automatically.
- Itemized expenses: If you choose to deduct your itemized expenses, you will need to save your receipts from any maintenance work on your car, parking and tolls, garage space, insurance payments, and loan payments. You’d then have to calculate the percentage of those costs that are for business purposes and deduct that figure.
Most people who use their cars for business purposes will choose to deduct their mileage, as it will typically end up benefiting them more than itemized expenses when tax season rolls around. If it’s your first year of owning the vehicle, you may want to track both items and then decide which would be the best option at the end of the year.
The Pros of the Use of a Personal Vehicle for Business Purposes
If you’re considering using your vehicle for business purposes, there are a few pros to this option.
- You’re more comfortable: For some people, it can be challenging to adjust to driving a new car or cause them stress to be under the pressure of driving a vehicle that is not theirs. You may feel more comfortable running business-related errands in your car, as opposed to a company car.
- You can make deductions: Depending on how much you drive for your job, it may end up working out in your favor to deduct your business mileage from your taxes at the end of the year. In 2018, the IRS set the standard mileage rate at 5 cents per mile.
The Cons of the Use of a Personal Vehicle for Business Purposes
Meanwhile, the downsides of using your car for work include the following considerations.
- You may need additional insurance coverage: If you use your vehicle for business purposes more than 50% of the time, your auto insurer will consider your car a commercial vehicle. That means you’ll need to have an insurance policy that covers a commercial vehicle. If this is the case, it may be worth it to use a company car or purchase your vehicle under your business if you own a company.
- You’re putting more miles on your vehicle: Miles are miles, whether they’re personal or business-related, and cars only last so long. When you use your car for both work and life, you’ll be putting more mileage on it than you otherwise would be, therefore shortening its lifespan.
Deciding Whether to Use a Personal or Business Vehicle
Ultimately, the decision of whether to use your vehicle for business purposes, use a company car, or purchase your vehicle as a business asset comes down to your usage and preferences. If you drive enough for work, it’s likely worth it to use a company-provided car that is also under a company insurance policy. Talk with your employer, your accountant and your insurance company to make the best choice for your needs.