Tax Deductions for Self Employed Limousine Drivers

Tax Deductions for Self Employed Limousine Drivers
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The Internal Revenue Service provides an array of business-related deductions to the self-employed that are not available to most taxpayers. Taxpayers who run a limousine service are eligible to deduct expenses related to the business. These taxpayers must become familiar with the rules governing each type of expense to ensure the deduction is calculated accurately.

Medical and Dental

Self-employed workers are eligible to deduct monies paid for health and dental insurance coverage. Premiums eligible for the deduction include those made to insure you and other family members. If you participate in a group health plan that covers other employees of the limousine business, amounts paid to cover employees are also deductible.

Limousine Loan Interest

The annual interest paid on a loan to purchase a limousine used in the business can be deducted on a tax return. To qualify, you must be personally liable for the debt, there must be an unconditional promise to repay the loan and a true creditor-debtor relationship must exist. Interest that accrues on a personal loan from a friend or family member used to purchase a limousine is also deductible provided the loan terms are fixed and you are not given flexibility in repayment terms not originally agreed to.

Garage Rental

Rent paid for garage parking to store the limousines is deductible. The rental fees must be reasonable and reflect the market rate in the area. Rental fees paid to related parties, such as other family members and friends, can be deducted provided they are reasonable. If you park the limousines on rented residential property, a portion of the monthly rent payment can be deducted as a business expense.

Automobile Expenses

If the limousine is used solely for business purposes, all related expenses can be fully deducted. Allowable expenses include the cost of gasoline, oil, repairs, maintenance, cleaning and tolls. However, if the vehicle is used partially for personal purposes, the deduction is limited to the portion of expenses related to the business. The IRS provides a standard mileage rate that is multiplied by total annual miles driven for business purposes to calculate the deduction.

Limousine Depreciation

The purchase price of a limousine must be deducted over time through depreciation. The IRS requires that the cost to acquire all automobiles used in a business be depreciated over 5 years, irrespective of the limousine’s actual useful life. In addition to the purchase price of the limousine, acquisition costs also include sales tax and title fees. However, a self-employed taxpayer is eligible to deduct the full purchase price of the limousine in the purchase year if a 179 Election is made. The election can be made on a maximum amount of purchases each year as determined by the IRS. In recent years, the lowest annual maximum imposed was $250,000.