In this Ask the Tax Expert, a reader asks about using a motorcycle for work purposes. A motorcycle mileage deduction could be valuable but does the IRS allow this?
Q. I'm a freelance photographer and I often use my motorcycle as my primary business vehicle. Can I just take a motorcycle mileage deduction using the standard mileage rate or is there something else?
-Andy L., Sheboygan, Wisc.
A. You can't use the standard mileage rate when you ride your motorcycle for business. The standard mileage rate, which allows you to deduct a set amount per business mile in 2016, may only be used for automobiles. This includes cars, vans, pickup trucks, panel trucks, and SUVs.
It costs less to operate a motorcycle than a car, so allowing motorcyclists to use it would give motorcycle riders an unfair tax deduction windfall. The IRS has been talking about establishing a separate standard mileage rate for motorcycles for years, but so far it hasn't happened.
This means you must use the actual expense method to deduct your costs when you use your motorcycle for business transportation. This requires you to keep track of what you actually spend during the year for gas, repairs, maintenance, insurance, license and registration fees, and other expenses. You can also deduct the special equipment you need to ride a motorcycle, like a helmet and leathers.
You'll also be able to take a depreciation deduction. There is very good news here, because motorcycles are not subject to the strict annual dollar limits on depreciation that apply to passenger automobiles. For example, if you put a car in service in 2016 and use it 51% of the time for your business, the maximum amount you can depreciate is $11,160, no matter how much the car costs. The limit is only $3,160 if you use the vehicle less than 51% for business.
These limits don't apply to motorcycles. If you use your motorcycle more than 50% of the time for business transportation, you'll likely be able to deduct your entire depreciable basis in a single year using a provision of the tax code called Section 179. For example, if you paid $20,000 for your motorcycle and use it 75% of the time for business in 2016, you can deduct $15,000 in 2016.
When you use the actual expense method, you still need to keep track of your mileage for business and the total miles you motorcycle during the year. This way you can figure the percentage of the time you used the motorcycle for business during the year. You may only deduct the business use percentage of your total actual expenses for the year.
For example, if you rode your motorcycle 50% of the time for business during the year, you may deduct 50% of your gas and other expenses. Using an app like MileIQ is a great way to keep track of your business mileage.
Each week, our resident small business tax expert, Stephen Fishman, answers your small business tax questions.