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Auto Insurance In My Company's Name? - YouTube
Channel: Toby Mathis Esq. | Tax & Asset Protection
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- [Toby] Does my auto insurance
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need to be in my company name?
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Such a trick question.
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- [Jeff] I feel like the auto insurance
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needs to be in the name
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of the owner of the vehicle, however-
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- [Toby] There you go.
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- [Jeff] For liability protection
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I would think the company
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needs some form of insurance protection.
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- [Toby] All right so is the-
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- [Jeff] What's the answer, Toby?
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- [Toby] You bring up
some interesting points.
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So I've dealt with this a few times.
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It gets really, yeah.
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This is like I say,
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it's a trick question
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because it's like,
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who's car is it?
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And are you in a state that
requires the vehicle insured
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or the individual?
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So like in this state of Nevada
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we insure the vehicle.
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So it's what you just said.
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If somebody's name is on that thing
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whoever's name it is
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better have the insurance.
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So if you want it in your company
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you better make sure that
the company has insurance.
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Here's the rub.
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You're going to pay a heck of a lot more
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for commercial insurance
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than you are going to be
for individual insurance.
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That said you want to make sure
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that if you're driving it
primarily for personal,
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in other words if it's
less than 50% business,
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there's no way in heck you want
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that car in the name of the company
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because you can't use all the
beneficial acts provisions
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like 179 and bonus depreciation
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because it has to be
more than 50% business.
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So if you're less than 50%
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you just want to
reimburse yourself mileage
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and frankly if you have a vehicle
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that's owned by a company,
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insured by a company,
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any time it gets into an accident
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whoever's driving it
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is going to be presumed
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to be acting on behalf of the business
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and you just brought liability
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into your business.
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So the only time
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I suggest people actually have
vehicles in their business
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is when it's the reality of the situation,
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the business actually
controls that vehicle,
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provides it to employees who run around.
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So like construction
companies I could see it.
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Somebody that's got
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a bunch of crews running around out there,
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I could see it.
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Otherwise reimburse yourself.
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I see accountants come up and say,
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"Oh no, we get these big deductions."
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I'm like the people I know
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tend to rotate their cars
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every four years.
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If you haven't depreciated that thing off
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and you're like year five or something
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and you don't trade it in
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or you sell it
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you have depreciation recapture
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even if you wrote it all off
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and you have a taxation of the
personal use of that vehicle.
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So if you have it 50% plus,
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let's say you're 60% business,
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then we could go on a schedule
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and we look at the value of the vehicle
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and you have to pay W-2 wages
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on 40% of the value of that vehicle
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from a lease standpoint.
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So the IRS gives us a little schedule
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and it says,
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oh you have a $30,000 car
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that's you know let's just say
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it's $10,000 of wages.
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And you say,
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"Well, I used it half for business."
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Okay that's only $5,000.
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You got to pay tax on
that like you received it.
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Somebody just said a sports car, yeah.
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- [Jeff] So in this case
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I'm using my personal vehicle in my name.
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It's insured in my name
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but I'm driving on company business
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and I have-
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- [Toby] Then you would
be the, you're driving-
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- [Jeff] Right.
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- [Toby] So you're the insured.
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So you're always liable.
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- [Jeff] Do I need to do
anything for my business
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to protect them from being sued?
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- [Toby] What you can do
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is if it's a business that says,
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"Hey I need my employees
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"to have access to a vehicle,"
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the business would have a policy as well
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but it would also say
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the employee has to maintain insurance-
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- [Jeff] Right.
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- [Toby] On that vehicle.
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So the business would kick in
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if they're having you do
something for business
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but if you're negligent
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the question is,
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is your employer going
to be responsible for it?
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They could argue it
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but changes are
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they're going to hit your insurance first
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and then they're going to
look at the employer's.
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- [Jeff] Okay.
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- [Toby] So in a general
liability policy of an employer
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it's going to have the provisions on it.
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You just talk to your insurance guy that,
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like ours here,
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we don't have a bunch of company cars
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but we definitely have a policy that says
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if somebody's driving
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you know, on behalf of the company,
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they're taking a client to the airport
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or something like that.
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- [Jeff] Right.
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- [Toby] We're driving,
that you're covered.
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Remember running into
that issue quite a bit.
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Somebody says if you wrap
your car with marketing decals
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does that make every mile
you drive reimbursable?
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No, that's why everybody,
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that's not advertising,
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I promise you.
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- [Jeff] Yeah, IRS killed that-
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- [Toby] Yeah.
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- [Jeff] Quite a few years ago.
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- [Toby] Yeah yeah, the wrap itself.
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You wrap your vehicle, yes,
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you can write that off
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but the vehicle and the miles,
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it matters what the intent is
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when you're moving your vehicle
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from one place to another.
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If you're traveling between
offices that's business.
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If you're commuting that's personal.
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If you're going to take your in-laws
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to a football game that's personal.
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I don't care how much swag you got
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on that vehicle
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or how much you know bling,
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I don't know the right word for it.
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- [Jeff] Swagging.
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- [Toby] Your advertising, yeah.
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It's like really cool
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but if you do do the miles
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now here's the thing
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that I always kind of look at.
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So I have a lot of clients.
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I don't know what it is
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but you start getting to taxes,
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they tend to get a little
bit cheaper, right?
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They start looking at dollars
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and they realize the value of a dollar
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and so some of them have older cars
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and the cars are paid off.
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They're not worth a ton.
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Maybe it's a $10,000 car
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or a truck or something like that.
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You get 58 cents a mile reimbursed
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whether it's worth a thousand dollars,
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$10,000 or 100,000.
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The IRS doesn't say your
mileage reimbursement
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is more if it's a nicer car.
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So my clients tend to like the fact
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that they can get tax-free money,
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non-reported cash that's
deductible to the company,
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over the years
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over and over and over again
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without regard to the actual
expenses of the vehicle.
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You get a set amount.
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It's kind of like if depreciation
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was the same amount for every house.
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We don't care what the house is worth.
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You get to write off $30,000 a year.
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Then you'd start buying cheaper houses
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because you'd say,
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"Hey, I'll never pay tax on it."
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- [Jeff] And I actually
had a client who did that,
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who would repeatedly buy old beater cars
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for the business
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for delivery or whatever.
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- [Toby] Yup.
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- [Jeff] He still got the same deduction
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as he would have
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if he'd been driving his Jaguar around.
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- [Toby] That's exactly right.
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Remember my beautiful truck that used to
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sit right out there?
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- [Jeff] Uh-huh.
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- [Toby] They kept threatening to tow it
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and it was a little ugly.
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Need to open an office
500 miles away, crazy.
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You get some crazy
people out there, right?
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So hopefully that answers your question.
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The insurance really
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you need to decide
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whether it's going to
be in your name or the,
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I mean whether the car
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is going to be in your
name or the company.
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If you're using an out-of-state entity
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like a Wyoming or a Nevada
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you're going to have to register it
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in your home state
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if you're going to have a vehicle anyway.
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So I tend to say
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own the vehicle in your name.
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It's cheaper insurance,
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keeps the liability to you
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and reimburse yourself for business miles.
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Use, the app I use is MileIQ.
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Really easy, it's just MileIQ
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and you can even put in there
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here's set trips that I do all the time,
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repeated trips and mark
them as a business trip
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and by the way
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if you have a home office
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then everything you drive
is pretty much business.
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I keep my car insurance
that's also for business use
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under my personal name
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but this year State Farm is sending me
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a questionnaire asking me
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if I'm using this car for business
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and if it's over 50% use
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and they want to charge you more.
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If it's more than 50% business
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they're going to want to say
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the parameter use of that
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is now commercial and they
want to insure you in that way.
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If you're using it more
than 50% for business
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well, A, you're going to get
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a lot of reimbursement back
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or you could actually have that one
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in the name of your company.
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Again if you drop below 50%
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you have depreciation recapture
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and bad stuff that can happen, so.
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- [Jeff] And who we're really going to see
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get hit by this
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is your couriers,
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your transportation
people like Lyft and Uber,
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things of that nature
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where their driving is
itself the business.
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- [Toby] Well and I guess I should stop
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because since we're talking,
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going back to the insurance one,
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and I'll actually click back to it
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just so you guys see it,
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you have two choices.
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You could actually do
the actual expense method
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or you can do the reimbursement
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but you have to pick the
year that you get the car.
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I don't think you can switch once you do
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even though that-
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- [Jeff] You can switch from mileage
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in a later year
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but once you start taking actual expenses
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you're stuck with it.
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- [Toby] You're stuck with it.
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So if you do actual
expense in the beginning
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you're sticking to it.
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Actual expense means you're writing off
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the actual expenses for the business use.
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So again the way they look at it
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is they say if it's
more than 51% business,
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great, you pay tax on the personal use.
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It's 100% deductible.
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Even the wages it's paying you,
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remember like if it's giving you the car
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and letting you use a car
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and you have to pay tax on it
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the company didn't give you cash.
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You just have to classify that as wages.
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The company has to pay its witholdings.
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You have to pay your witholdings.
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Failure to do so subjects you
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to some penalties and some nastiness
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but you would just,
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you would end up paying tax on it.
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No money changed hands
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but a fringe benefit
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is presumed to be taxable
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unless there's an exception.
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So if I give an employee a car
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that's presumed to be taxable.
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To overcome the presumption
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I have to be,
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they'd have to be using
it more than 50% business
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in which case then they would just
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pay a tax on the portion
that was personal use.
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See how it gets a little muddy.
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That's why it's so much easier
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just to reimburse miles.
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The miles if 58 cents a mile
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and it doesn't matter
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what the vehicle is
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and how much you spent on it.
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So if you have a Prius that
doesn't cost anything to run
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and it gets 50 miles to
the gallon and never,
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you know and the tires on it are 100 bucks
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it's still 58 cents a mile
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whereas if you have Jeff's Maserati
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you got to,
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he probably pays a thousand
dollars a tire, right?
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- [Jeff] Oh yeah yeah.
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- [Toby] Just trying to
visualize Jeff driving.
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- [Jeff] I have to send
it back to air league,
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get the tire rotation.
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- [Toby] Yeah okay, I just
see you in a Maserati.
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If you ever come up in a Maserati
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I'm taking pictures.
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Accountants just instinctually can't,
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like they get into the Maserati
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and it like ejects them
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because you're like
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this is such a waste of money, right?
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- [Jeff] That's right.
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