Who should own the business car: Corporation or Individual?

Question

As a tax practitioner, I have clients who operate single-owner S corporations. They want to know who should own the business vehicle—the individual or corporation—and its ramifications. I am confused about what answer to give my clients. I need help.

Answer

Yes

Individual Ownership

Financially it is advised for the individual to own the vehicle because the owner can get a better rate on vehicle insurance. However, owning the vehicle personally and having the corporation reimburse actual expenses for depreciation and/or Section 179 expensing complicates the corporate tax returns.

Corporate Ownership

If the vehicle is in the corporation’s name then the corporation deducts 100 percent of actual expenses. To calculate the value of the personal use, the actual cost of the gas and a lease value from an IRS table must be used. In this case, either your client reimburses the corporation for their personal use, or the corporation places a value on the client’s W-2.