When it’s time to file taxes, are you one of the people that is scrambling to find things that you can write off? You’re not alone. Your favorite YouTubers do it, too.
According to Code Section 162-A, some YouTubers can write off a car on their taxes as long as the car is ordinary, necessary, and reasonable for their business. YouTube does count as a business, as long as the channel is being treated like a business.
In this article, we’ll discuss the ins and outs of how YouTubers can write off their car on their taxes. Keep reading to learn more!
Can YouTubers Write Off Cars?
You may have heard that all YouTubers can write off tons of different things just because they may show them on one of their videos, but this isn’t actually true. Cars are one of those things. There is a huge myth about YouTubers getting to write off their Tesla on their taxes, just because their last video displayed a picture of it. The truth is that some YouTubers can write off their cars, but only in certain cases. The most important way to determine whether or not they can is to determine whether or not their channel is a business.
YouTube channels can qualify as businesses, but only if they’re run as an actual business. You have to be tracking your finances the way that a business would, planning content the way that a business would, and really just running your channel like you’d run your own small business.
One way to figure out whether or not you can write off your car because of your YouTube channel is to use Code Section 162-A, which says that write-offs need to be ordinary, necessary, and reasonable for your business. To determine whether or not a car meets these requirements, here are three questions you can ask yourself:
- Are cars ordinary for your business?
- Are cars necessary for you to purchase for your business?
- What would be deemed reasonable based on your business as a purchase and business deduction?
If your YouTube channel is quite literally based on cars, then yes, cars are ordinary for your business. Even if your channel is focused on something else, like travel or road trips, for example, a car still would qualify as being ordinary for your business.
Your YouTube channel may cover the exact process of buying a car, so you could argue that it is necessary to buy cars for your business. For that road trip channel, a car is absolutely necessary to buy or lease, especially if you don’t have one.
To decide whether or not your purchase is reasonable, just take a step back. Do you need 10 different luxury cars for a YouTube channel dedicated to road-tripping? No. It just isn’t reasonable. (Source)
How to Write Off Cars on Your Taxes
There are two different ways to write off cars on your taxes: by mileage, and by the actual cost. Both are really great ways to save tons of money in the long run. The wonderful thing about both ways is that they are so easy to figure out, and they don’t take long to calculate.
Of course, no tax write-off really takes long to calculate if you’re keeping track of your finances as you should be. The first step to figuring out your tax write-offs for anything, not just cars, is to keep track of your finances. This will make filing your taxes worlds easier for you when the time comes. (Source)
Writing Off Cars According to Mileage
Using mileage is one of the methods you can use to write off your car on your taxes. Now, this isn’t just the amount of mileage that is on your car or the number of miles you drive in a year. This is based on the number of miles you drive that are strictly business-related.
So, because this isn’t all of your mileage (unless you’re driving a business car), you need to make sure that if you’re using this method, you’re tracking your car’s mileage. In this method, you can take off 56 cents per mile driven, which may not seem like a lot, but when it is added up at the end, you’ll realize that you’ve saved thousands of dollars. (Source)
Writing Off Cars According to Their Actual Cost
Using the actual cost of a car is another one of the methods you can use to write off your car on your taxes. This method takes into account all of the factors that play into how much your car costs you, hence the name “actual cost”. This includes things like your car payment, the depreciation of the car’s value, your insurance payment, the amount you pay for gas, the cost of your tires, and the costs of repairs.
Great deal, right? But how does it work?
Take a second to calculate the percentage of the vehicle that is used for business. To write off your car according to this method, you should be using it at least 50% of the time for business. Once you’ve calculated that out, you can use that number to deduct that percentage from the costs that we listed above. For example, if a YouTuber used their car for their channel half of the time and for their personal life the other half of the time, the YouTuber could deduct 50% from their insurance costs, car payment, gas expenses, cost of tires, and repair costs.
That is a ton of money saved. Just imagine for a second how much money you could save if your vehicle was used for just business! That’s 100% of your expenses, completely written off.
Whether or not you have bought or are leasing your vehicle also makes a difference when it comes to writing off your car on your taxes.
Now, if at least 50% of your vehicle use isn’t for business, then writing your car off this way doesn’t make sense. Using the mileage method may help you get a better return. (Source)