No matter whether a person has their own business or is working for a company, he or she should always have concerns about financial controls. As a measure of cost-cutting, many people today use their personal car for work instead of purchasing a separate business vehicle. Such an approach has advantages and disadvantages. Let’s take a look at theses pros and cons:
When it comes to the benefits, using a personal car for work is identified to be the most affordable method for business owners. The respective business owner has to look at the maintenance costs, operating costs, repairs, navigational system updates, and insurance of only one vehicle. However, on the other hand, the respective car may accrue an excessive amount of miles which might reduce the overall value of the car sooner than expected.
As an employee, using a privately owned car for business purposes (client visits, product delivery, business meetings, etc.), entitles the employee to reimbursement of expenses from the employer. The employee should, however, understand that the regular routing of ‘home to work’ is not considered business travel.
In most of the cases, the employer can reimburse a flat per-mile rate (which should be reasonable). The vehicle owner should maintain a mileage log to make this approach a practical one. Recording odometer numbers before and after every trip made. Apart from that, all the receipts related to the operational cost of the car should be attached to the log as references (gas, tolls, etc.).
If an employee uses his car for business work, they should agree with the employer about the reimbursement policy before the car is used. This agreement should express the per-mile rate the company pays and a list of other reimbursable expenses that can be claimed.
When an employee uses his or her personal car for work and is reimbursed the mileage cost from the company, that amount is exempt from tax. However, if an employer pays more than the standard mileage rate, the owner of the personal car (the beneficiary) is required to pay tax on that amount.
If a person is self-employed or owns a business, there are tax advantages to having a business vehicle. Although a log has to be kept to separate business-use versus personal-use much of the expense of maintaining the car can be written off under the business. If the business relies on a navigational system to do deliveries or visit job sites, the updates for that system are included in the maintenance of the car.
So, an individual who uses a personal car for work should have a sound analysis of the pros and cons before moving forward.
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