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How is buying a company vehicle a "tax loophole"?

• mrguyorama 2y ago
  Because you buy it as a "company vehicle" but 98% of it's miles are driven for your personal use. Whether the tax code considers that a loophole doesn't matter. It's a loophole to give a personal item the tax treatment of a business asset. You wanted to buy the vehicle anyway, you were going to buy it anyway, but for some absurd reason you get to count a personal vehicle against your company's tax liability.
  • JohnFen 2y ago
    The IRS considers that tax evasion rather than a loophole, though. Unlike using a loophole, it's actually illegal. That said, you're right -- the practice isn't that rare and that's how it's done.
• quickthrowman 2y ago
  The business spends pretax dollars to pay the car payments instead of post tax W2 income or dividends/other cash disbursements that are taxed and then you can depreciate the company car against future income.
  • potato3732842 2y ago
    So? Businesses spend pre-tax dollars on most things they buy. Most companies literally don't have the margins to be solvent if all their purchasing activity is subject to 20%+ tax.
    • NewJazz 2y ago
      I think the implication is that the small business owners use this tax structure, but then use the car as a personal vehicle rather than a business vehicle.
    • quickthrowman 2y ago
      This thread is discussing how business owners use tax loopholes to buy personal vehicles as company assets to avoid paying with their personal post-tax money. It’s obvious that most businesses can’t survive if their revenue is hit with income tax before expenses are paid, that’s why revenue is not taxed as income.