by Tom Andrews, CPA
Many yacht crew members will use their personal vehicle for vessel / yacht business. In many cases they are not reimbursed by the vessel and simply use the vehicle without regard for the potential tax benefits of an auto deduction. If a vehicle is used exclusively for your business, then generally you may deduct the cost for the operation of the vehicle. It should be noted however that the standards of “exclusive use” are hard to meet. It’s more likely that your vehicle is used for both personal and business and you will, therefore, have to determine what operation expenses are considered deductible.
Generally, travel between two business destinations is considered a deductible operation of the vehicle. This means that travel from your vessel to the post office to deliver mail or the supply store to get provisions. This also includes travel from one vessel location to another’s and back to your vessel or place of business. Travel to work locations that are different from that of your regular place of business also count. However, travel from your home to your regular place of business on a regular basis is NOT deductible, these are considered “nondeductible commuting miles”.
Many clients inquire as to whether it is more cost efficient to write off the actual cost of a vehicle and fuel or if is more advantageous to write off the IRS approved standard mileage rate (54 cents per mile for business miles driven in 2016). In my experience the IRS standard mileage rate will provide a greater deduction than keeping track of the actual costs. Even if the IRS mileage rate provides a lower deduction, the time spent keeping track of receipts and actual costs may outweigh the benefit of that actual cost savings. That is not to say there is no administrative work with tracking your mileage. The IRS will expect to see a mileage log with a beginning odometer reading and an ending odometer reading, they will also expect a description for each business destination. In some cases an IRS auditor may also ask for some type of third party documentation that supports the odometer reading…. this may include a oil change receipt that has your odometer stamped at a certain point in time.
If your employer reimbursed you or gave you an advance or allowance for your employee business expenses that is treated as paid under an accountable plan, the payment should not appear as income on your Form W-2 (PDF), Wage and Tax Statement. You do not include the payment in your income, and you may not deduct any of the reimbursed amounts. It should be noted that many crewmembers do work for foreign flagged vessels, some of these vessels do not have a formal “accountable plan” in place, in these instances in which the crewmember is not reimbursed for mileage they may write off their mileage deduction as an itemized deduction for unreimbursed employee expenses. If you are unsure as how to record your mileage deduction for tax purposes we recommend you consult with your accountant.