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  • Car Decals and Tax Deductions: What Every Business Owner Should Know

Car Decals and Tax Deductions: What Every Business Owner Should Know

Article Date: January 14, 2025


Car decals are popular signages for vehicle advertisement because they are durable, eye-catching, and effective in boosting brand awareness wherever the car goes. They are also more affordable than full vehicle wraps and more suitable for long-term campaigns than car magnets.

If you use car decals to advertise your products or services, you’d be happy to know that they are often considered advertising expenses, which means that they are tax deductible. However, you need proper recordkeeping and documentation to take advantage of the IRS tax deduction code.

4 Tax Implications of Car Decals in Vehicle Advertisement

Incorporating car decals into your advertising campaign offers these four potential tax benefits.
  1. Advertising Expense Deduction
    If you specifically purchase and use car decals to promote your business, they are considered “ordinary and reasonable” expenses associated with advertising. Consequently, their cost can be deducted from your taxable income.

    Things to keep in mind:
    • Putting up display material to advertise your business does not change the use of a car from personal use to business use. However, if you use your vehicle for both personal and business purposes, you may deduct the cost of its business use (including vehicle ads), according to the IRS.

    • You can’t deduct the cost of driving around your personal car with your company’s ad or logo on it.

    • Advertising for personal hobbies is considered a non-deductible expense.

    • Advertising expenses for political purposes are non-deductible. Any expenses you incur to support political candidates are not deductible on your business and personal tax return.

    • Other signs used for vehicle advertisements, such as car magnets and full vehicle wraps, are also tax deductibles.

  2. Home Office Deduction
    If you use a specific area of your home regularly and exclusively for business, the IRS allows a home office deduction, whether you rent or own it. This tax deduction includes a portion of home expenses like rent, utilities, home repairs and maintenance, and mortgage.

    For self-employed individuals and professionals, incorporating car decals into their advertising and marketing campaigns also makes it easier to back up their home office deductions. With professional-looking vehicle ads, they can show that they are running a bona fide business rather than just a side hustle every once in a while.

    Things to keep in mind:
    • Proper documentation is important to prove business-related expenses in your home office. This way, you can enjoy deductions when you file taxes.

    • Home office deductions only apply to self-employed individuals and professionals; these are not applicable to anyone who works for an employer.

  3. Vehicle Expense Deduction
    If you’re using a vehicle exclusively for business purposes, related expenses like gas, maintenance, and repairs are potential tax deductions. However, if you use it for both business and personal purposes, you may only deduct the business-related expenses, like the gas and toll fee you pay every time you visit a client to do a home inspection or repair.

    For self-employed individuals, car decals and other vehicle ads can help solidify the role of their cars or pickup trucks in promoting and running their business. Hence, these signages can make it easy to prove vehicle expenses as business tax deductions.

    Things to keep in mind:
    • Tax deductions are not applicable if you use your car for commuting and other personal uses, even if your business logo or name is displayed on its body.

    • If you use your car both for business and personal purposes, you need to calculate the percentage of your vehicle used for business activities (e.g., 65%, 90%, etc.).

    • If you have a vehicle you use for business, operating costs such as auto loan, parking, tolls, registration and property tax fees, insurance, repairs, oil, licenses, and depreciation (or lease payment) are potential tax deductibles.

  4. Depreciation Deductions
    Depreciation happens when an asset, such as your car, loses value over time. This has tax implications, allowing you to spread out the cost of acquiring this asset and enjoy a deduction for a portion of its cost annually.

    Using car decals for mobile advertising can help you prove that you use this asset for business, rather than for personal use.

    Things to keep in mind:
    • To enjoy depreciation deductions, you must prove that your car is used more than 50% of the time for business purposes.

    • Proper documentation is critical to proving your claim — document each trip, create a detailed mileage log, etc.

    • If you don’t account for asset depreciation, your profits may suffer.

    5. Conclusion

    Using car decals to turn your vehicle into a mobile billboard is a great way to get your brand out there. Moreover, they can serve as tangible proof that you are using your vehicle for business, making it easier to take advantage of the IRS tax deduction code.

    Although the tips mentioned here can help you understand the potential tax benefits of car decals, you may still need the help of a professional who is aware of state-specific tax implications and can provide more in-depth advice.

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