So, you’re thinking about buying a car for work. Maybe you want the tax benefits, or maybe you just want an excuse to upgrade your ride. Either way, before you start test-driving, let’s talk strategy because when it comes to taxes, the wrong move can cost you. And as any smart entrepreneur knows, every dollar saved is a dollar that can be reinvested in growth.
At Insogna CPA, we work with Austin’s small business owners and seasoned entrepreneurs like you every day, making sure you don’t leave money on the table. Let’s break down the five biggest tax factors to consider before you sign on that dotted line.
1. Leasing vs. Buying: What’s the Better Tax Move?
It’s the classic debate: lease or buy? Both options come with tax perks, but the best choice depends on your business model. Leasing offers lower upfront costs and lets you deduct lease payments, while buying allows for depreciation deductions and builds long-term equity. If you’re all about keeping cash flow flexible, leasing might be your move. But if you’re in it for the long haul, purchasing could offer bigger tax benefits over time. A quick chat with an Austin, Texas CPA can help you make the smartest call.
2. Business-Use Percentage: How Much of Your Car is Deductible?
Here’s the deal: your tax deduction is based on how much you actually use your vehicle for business. If you’re using it 70% for work, you can only deduct 70% of those expenses. That means fuel, insurance, maintenance—everything gets prorated. So, if you’re thinking about writing off that luxury SUV but only driving to client meetings twice a month, the IRS will see right through it. Keeping a mileage log (yes, an actual one) will save you a headache later. Need a system that works? A CPA in Austin, Texas can help you get it right.
3. Section 179: The Loophole That Can Save You Thousands
Thinking about a truck, van, or SUV for your business? Section 179 could be your best friend. This tax rule lets you deduct a big chunk or even the full cost of a heavy vehicle in the first year. But before you start picking out leather interiors, remember: the vehicle has to meet specific weight requirements, and it must be used for business at least 50% of the time. Play it right, and this could be one of the biggest deductions you take all year. Not sure if your dream car qualifies? That’s what Austin CPA firms like ours are here for.
4. Employer-Provided Car Allowances: The Taxable Surprise
If your company gives you a car allowance, don’t assume it’s free money. Most of the time, it’s taxable income, which means Uncle Sam takes a cut before you even get to enjoy it. But if you’re self-employed, you get more flexibility. You can deduct either actual vehicle expenses or use the IRS standard mileage rate to lower your tax bill. The right strategy depends on your driving habits, so before you make any moves, talk to an Austin tax accountant who actually understands business owners.
5. W-2 vs. Self-Employed: The Rules Are Not the Same
Here’s where a lot of people get tripped up. If you’re a W-2 employee, you generally can’t deduct car expenses anymore (thanks, tax reform). But if you’re self-employed, that’s a whole different story. You can write off business miles, maintenance, gas—the works. The trick is knowing how to track and maximize your deductions legally. This is exactly why smart entrepreneurs work with Austin CPA firms to make sure they’re not missing out on tax breaks that could be fueling their business instead.
Before You Sign That Lease, Let’s Talk Tax Strategy
The last thing you want is to buy a car thinking you’ll get a tax break only to find out you did it all wrong. That’s where we come in. At Insogna CPA, one of the most trusted Austin accounting firms, we help entrepreneurs like you make smart, tax-savvy decisions that actually move the needle. Whether you’re leasing, buying, or just trying to figure out what makes the most sense for your business, we’ve got you covered.
Let’s make sure your next car is working for you, not against you. Schedule a consultation with an experienced CPA firm in Austin, Texas today...