Tax professionals please advise, car dealer's company car gas deductible?

Question

I am a salesperson at a car dealership. My only vehicle is a company provided demo. Basically, if I reach a certain sales goal every month, I get to use the car. We have to turn them in after 5k miles and get a new one. They are not registered to us. I've noticed lately that I do alot of sales work outside of work as a condition of having this company car. People stop me all the time to ask me about the car, ask me about other cars, or to get my card, and I catch people peeking in and reading the window sticker quite often. The actual purpose of the car is to be used as a "demonstrator" meaning it's basically a moving ad for the dealership. As a result, is it possible for me to deduct any costs associated with the car, such as gas or repairs, because no matter where I'm driving I'm still technically conducting business? I don't have any other reason to contact a tax professional and I really don't want to spend alot of money to get a simple answer. Thanks to anyone who can help!

They already tax me for the car. They didn't do this at my last dealership, but basically they add $300 to my paycheck so they can deduct $300 for the demo "expense", so it can be taxed. So they already do that.

Answer 1

Actually, the IRS will treat the fair rental value of that demonstrator as income to you. Your employer most likely includes this on your W-2 at the end of the year. If they don't, they should.

Any cost of operating it that is strictly for business use is deductible. An example would be delivering a customer's new car or taking a potential customer for a test drive. Keep careful records of that use. However the "rolling ad" argument is explicitly forbidden by law so don't even try that one if you are audited.

Answer 2

The usual IRS answer is that if your employer provides you with an office, as yours does, then any transportation between your home and the office is personal and not deductible.

The other clear case is when you have no regular office and drive a company owned vehicle in order to conduct the company's business [example: a manufacturer's rep who travels to his clients' offices and sells there]. In that case, all documented business expenses [prorate by miles if necessary] are deductible.

Absent a private letter ruling that fits your case exactly [for which you'll likely have to pay a professional to do the research to try and find], I suggest that the attention the car draws and business cards you give out are incidental to your main method of making income [being at the lot and on the phone], and thus the expenses you mention are not deductible.

Further, if/when you are audited, I expect the IRS will claim that since you have to earn the next month's "free" use of the car by making some specified sales goal that the fair value of that use is taxable income to you and part of your wages. In that case, both income taxes and FICA taxes are due on the fair value. The dealer may know this already [it gets audited as well] and include that value as wages on your W-2 come yearend. (They are liable for FICA withholding unless some exception applies.)

ugh. sounds like it might be worth your while to pay for that professional advice.

:(

Answer 3

As you conduct your personal activities, the costs of driving the car are primarily personal expenses and not deductible. This includes driving to work and back.

If you drive to an event specifically for your employer, and he does not reimburse you for fuel, you could deduct that, plus parking and tolls. You cannot deduct regular mileage even when you drive for business purposes because you do not own the car.

Your use of the company demo is a working condition fringe benefit and is not taxable to you.

Added later: Quote from IRS Pub 15-B

Demonstrator cars. Generally, all of the use of a demonstrator car by your full-time auto salesperson qualifies as a working condition benefit if the use is primarily to facilitate the services the salesperson provides for you and there are substantial restrictions on personal use.

Answer 4

best answer is up there, but me too maybe