is detailing a business expense?

T

tssdetailing

New member
Despite it's luxury connotation, Is it reasonable to belive that we can leverage vehicle detailing as a business write off? I would think that it's right up there with maintenence services such as oil changes and new tires.
 
Greg Nichols said:
so can we easily claim detailing our own vehicles as a business expense?



Cheers,

GREG
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Absoultly!! it's in your businesses best interest to "put it's best foot forward" so to speak. And you can easily prove that a clean vehicle presents more of a professional image than a dirty one especially in this field. You will have no issues writing off detailing your own "work" vehicles as a business expense.
 
Since nobody here has any accounting experience in public practice, I will offer some insight.



The IRS dictates that some expenditures cannot be expensed, but instead be capitalized for depreciation throughout the useful or predetermined life of the vehicle.



Here is a quote from the IRS literature:

Motor vehicles. You usually capitalize the cost of a motor vehicle you use in your business. You can recover its cost through annual deductions for depreciation.



Generally, repairs you make to your business vehicle are currently deductible. However, amounts you pay to recondition and overhaul a business vehicle are capital expenses and are recovered through depreciation.
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There's no formula specified to determine whether an expense is to be capitalized or deducted. You will have to use discretion. Whether a vehicle repair or reconditioning is considered a capital expenditure or expense, generally speaking, is determined on the useful life of the service performed.



Money spent on bedlining or rustproofing would be capitalized to the cost of the vehicle, and deducted by means of depreciation throughout the useful life of the vehicle.



A detailing expense could either be capital expenditure or maintenance expense. In order to prove that it is an expense, you must prove that your business vehicle receives detailing treatment for more than once a year, AND that your business vehicle relies on detailing in order to operate for business purposes. If you only perform a detailing service once every couple of years, then it would likely be considered a capital expenditure.



And depending on how much of the vehicle is used for business purposes, you may not be able to deduct the entire amount.
 
Greg Nichols said:
so can we easily claim detailing our own vehicles as a business expense?



Cheers,

GREG
Click to expand...



Only for your out of pocket cost, ie what it cost you in materials and such to detail your own car. You will not be able to write off your normal rates. Your customers can because that is what they truly paid out of pocket.
 
People who are recommending customers to deduct the detailing costs need to be a little careful. When writing off business expenses there are criteria that must be met for an expenditure to be an expense that can be deducted in accordance with Internal Revenue Code 162 "Trade or Business Expenses". The code states:



"(a) In general. There shall be allowed as a deduction all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business, including



"(1) a reasonable allowance for salaries or other compensation for personal services actually rendered;



"(2) traveling expenses (including amounts expended for meals and lodging other than amounts which are lavish or extravagant under the circumstances) while away from home in the pursuit of a trade or business; and



"(3) rentals or other payments required to be made as a condition to the continued use or possession, for purposes of the trade or business, of property to which the taxpayer has not taken or is not taking title or in which he has no equity."



While this rule is a bit wordy, the thing to take away from this is that for an expense to be deductible, the expense must be ordinary, necessary, and reasonable. Based upon this, your customers whose jobs require travel (especially if they are in sales where appearance matters) should have no problem writing off Bi-monthly washes and quarterly claying and LSP's. However, trying to argue that $500 full detail was (1) an ordinary expense in the course of business, (2) necessary to conduct business and (3) reasonable would probably be a lost cause. The expense has to meet all three criteria and a full detail probably fails to meet all three. So be careful when selling your services as tax deductible because more common services (wash, wax) probably are deductible but the Autopian services (which we love and cost much more money) probably are not.



It was a decade ago since I passed the CPA exam so to details are a little fuzzy since I mostly have done financial statement auditing and non profit financial reporting rather than tax but I do remember the ordinary, necessary and reasonableness criteria for the deductibility of a business expense. When you sit down with your CPA's for this year's tax return, bring this point up. I am sure he or she which deals with taxes on a day to day basis is much more on top of this than I am.
 
the_invisible said:
Since nobody here has any accounting experience in public practice, I will offer some insight.



The IRS dictates that some expenditures cannot be expensed, but instead be capitalized for depreciation throughout the useful or predetermined life of the vehicle.



Here is a quote from the IRS literature:





There's no formula specified to determine whether an expense is to be capitalized or deducted. You will have to use discretion. Whether a vehicle repair or reconditioning is considered a capital expenditure or expense, generally speaking, is determined on the useful life of the service performed.



Money spent on bedlining or rustproofing would be capitalized to the cost of the vehicle, and deducted by means of depreciation throughout the useful life of the vehicle.



A detailing expense could either be capital expenditure or maintenance expense. In order to prove that it is an expense, you must prove that your business vehicle receives detailing treatment for more than once a year, AND that your business vehicle relies on detailing in order to operate for business purposes. If you only perform a detailing service once every couple of years, then it would likely be considered a capital expenditure.



And depending on how much of the vehicle is used for business purposes, you may not be able to deduct the entire amount.
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When the IRS code mentions capital expenditures on a vehicle which must be depreciated, the code is referring to expenditures which extend the useful life of the vehicle such as rebuilding the engine or transmission. No detailing expenses would have to be capitalized regardless to whether they are performed annually or every few years, the tax code would view this as maintenance which is expensed in the year performed. Similar to how if a business paints the interior walls of its building every five years, the paint work would not be capitalized, it would be expensed in the year the work was performed.



The same would go with rustproofing, it would not be a capital expense, the tax code would view this as preventative maintenance and it would be deductible in the tax year performed. Bedlining would most likely full into the same category unless the cost was considerable.
 
Detailing expense is not capital. It is a service performed as maintenance.



From my meager accounting experience you'd have to spend more then $1000 to be able to call it capital and be able to amortize it.
 
tssdetailing said:
yikes...tax talk makes me dizzy!
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Which is why every person who owns their own business (detailers also) should have a CPA who has extensives tax preparation experience prepare their return and give them tax advice throughout the year. I would highly recommend not using H&R Block or other companies, which do a fine job on simple returns but if you have your own business, a CPA with plenty of tax experience is the way to go.



I am a CPA but due to my experience being away from tax, I would even hire another CPA to prepare my return and advise me throughout the year.
 
bert31 said:
I am a CPA but due to my experience being away from tax, I would even hire another CPA to prepare my return and advise me throughout the year.
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I believe you are correct, and my applications of of business expenses treatment do not apply for everybody. I've spoken too quickly.



I am a Canadian CMA and I own businesses on the Stateside.



There are discrepancies between the Canadian CRA rules and the American IRS codes. Due to strict regulations, not a lot could be deducted for taxes in Canada for motor vehicle expenses. I have followed the Canadian tax suggestions on my IRS returns regarding motor vehicle expenses (for revenue recognition, COGS calculations, capital lease expenses I comply fully with the IRS regulations). The capitalization of long-term maintenance costs on my business vehicles have never been an issue on my American tax returns. It also allows me to keep track of the CCA deductions on my Canadian returns.
 
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