Personal vehicle used 100% for business (partnership): Do I expense related expenses to Auto (operating expenses) or Vehicle Expenses (other expenses)?

Acc-JasperCD · ‎April 05, 2023

I'm setting up QBO for my multi-member LLC (partnership). It is a construction/ general contractor business with 2 partners: myself and my father (50/50 ownership). He owns a van that is registered to him (personal) but he is using it 100% for the business and all van related charges are being charged to the company bank/credit card accounts.

My question is, how come I have 2 choices for categorizing these expenses: "Vehicle Expenses" (Other Expense) OR "Auto" (Operating Expenses)? My understanding is that since this van is being used entirely for business purposes it would go under "Auto" since it is part of the operating costs of the business, but QBO automatically categorizes them as "Vehicle Expenses" and it's applicable subcategories (Repairs, Gas & Fuel, etc.) which are shown as other expenses of the business in the P&L. What is the difference between these two expense accounts for tax purposes?

Rainflurry · ‎April 06, 2023

@Acc-JasperCD

You are correct, they should be recorded as operating expenses. Other expenses are expenses unrelated to the primary operations of your business. Operating expenses, as the name implies, are expenses related to your primary operations. Having the two categories is more about where they are reported on your P&L than for tax purposes since any ordinary and necessary expense is tax deductible.

Acc-JasperCD · ‎April 07, 2023

Thanks for confirming!

A couple follow-up questions: Since this is a personal vehicle being used entirely for the business, we're not allowed to take depreciation on it correct? Just the operating expenses? Would that only be allowed if the vehicle is owned and registered under the LLC?

I understand the liability implications of the LLC owning the van vs personal, but trying to understand if there are any other tax benefits other than the depreciation.

Acc-JasperCD · ‎April 07, 2023

Thanks for confirming!

A couple follow-up questions: Since this is a personal vehicle being used entirely for the business, we're not allowed to take depreciation on it correct? Just the operating expenses? Would that only be allowed if the vehicle is owned and registered under the LLC?

I understand the liability implications of the LLC owning the van vs personal, but trying to understand if there are any other tax benefits other than the depreciation.

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Personal vehicle used 100% for business (partnership): Do I expense related expenses to Auto (operating expenses) or Vehicle Expenses (other expenses)?