Some business owners may wonder: “Are wrap fees tax deductible?” Any investment in advertising and marketing can be 100 percent tax-deductible compared to equipment purchases and other expenses. However, before you file any deductible expenses, it’s best to consult your tax advisor before taking action.
Tax experts can recommend validating if car signage tax deduction can be applied to your business.
Below we’ll explore some of the details about vehicle wrap tax deduction that will help you make an informed decision.
Essential Details About Vehicle Wrap Tax Deduction
Some business owners who have invested in vehicle wraps may wonder if they could file for advertising and promotion tax deductions. The short answer is yes; the cost of installing fleet wrap is considered a marketing and advertising investment, which is tax-deductible.
If you hired an experienced fleet wrap installer, like AZPRO, you’ll be paying for the graphic design, production and installation of fleet graphics. In addition, the vinyl will contain branding images, marketing messages and your business logo. Your contact information will also be displayed on the exterior of your company vehicles.
These symbols and messages are forms of advertisements, which the Internal Revenue Service (IRS) considers fully tax-deductible. However, merely installing them won’t always qualify as tax-deductible. There are certain applications the IRS deems as “ordinary and reasonable” under IRS Publication 535 Business Expenses.
Here are a few rules you need to keep in mind:
- All business advertising are tax-deductible, including vehicle wraps, company license plates, stickers, decals and placards.
- Any company vehicle with advertising graphics that the public can view can be qualified as a form of advertising.
- Placing advertisements or any kind of display material on a vehicle doesn’t automatically change its use as an advertisement. This rule implies that if you drove the vehicle for personal use, you can’t charge the mileage as a deductible expense for your business.
- You can only conduct the use of your vehicle as a business expense when you drive it and use it for business operations and similar purposes.
- Advertisements, such as fleet graphics installed in company vehicles, count as a car signage tax deduction.
- Only business miles can be filed as advertising and promotion tax deductions. Always track the business miles used as advertising. However, when employees use company vehicles to commute from home to work and vice versa, it won’t count as a deductible.
So, are wrap fees tax deductible? In most cases, the answer is yes. Make sure to keep your receipts after you have installed fleet graphics or if you have any maintenance work. They can be used as tax-deductible expenses.
However, the use of your car and the mileage should be qualified, which is why it’s crucial for you to first consult with your tax advisor. Vehicle graphics are a cost-effective form of advertising, and the costs can be tax-deductible. But you’ll need to prove that certain uses of your fleet-wrapped vehicles are for advertising purposes.
What Part of Vehicle Wrap Expenses is Tax Deductible?
The IRS deems the majority of advertising expenses as reasonable miscellaneous tax deductibles. This category includes all types of vinyl wraps installed on your company vehicles.
Regardless of size, all types of decals can be considered tax-deductible. This definition includes partial vehicle wraps as well. If partial wraps are installed on your company’s vehicles, you can have them qualified as an advertising expense.
All the costs associated with creating fleet wraps can also be tax-deductible. This cost includes designing the graphics, production, installation and maintenance. Since these costs are necessary for your organization’s operations, according to IRS rules, these expenses will fall under miscellaneous tax deductibles.
In addition to the cost to install and maintain fleet graphics, you can also deduct the fuel costs, vehicle payments, mileage, lease payments and vehicle maintenance costs to your deductibles. This policy works well for smaller businesses that rent vehicles to promote their business or use them for employee transportation. As long as these vehicles are used in your operations and have fleet wrap advertising your business, you may include certain maintenance and operational costs on your tax returns.
Short-term wraps (those used for a limited time) can also be qualified as tax-deductible. For example, let’s say you’re running a quarterly promotion and installed fleet graphics in your vehicle. Whenever that vehicle is used to transport goods or advertise your business, it can qualify as an advertising expense. The cost of wrap installation, gas, mileage and maintenance of that vehicle, while used as an advertisement, can be added to your deductibles.
Pitfalls to Avoid
There are certain pitfalls when business owners try to qualify certain investments and expenses as a vehicle wrap tax deduction. For example, some would try to deduct everyday wear and tear as a deductible expense, but that won’t apply. However, regular and scheduled fleet wrap maintenance can be considered a deductible.
You also won’t be able to use the mileage and gas expenses when using your vehicles for personal purposes like taking your kids to school or using your company vehicle for weekend trips.
If you aren’t sure which part of your expenses can be considered a deductible on your tax returns, it would be wise to keep all your receipts. Then, present them to your accountant or tax attorney to check if they qualify under specific tax codes implemented in your area.
Use Cost-Effective and Tax Deductible Fleet Wraps to Advertise Your Business
At AZPRO, we install high-quality, long-lasting vehicle wraps that effectively advertise your business. We also equip you with useful kits and tools to care for your fleet wrap to prolong the usable life of your investments. Our products also carry a 3M Matched Components Systems (MCS) warranty. Our team provides receipts and documentation, which you can use for filing tax returns. Call our specialists at 866-503-8345 or fill out this contact form to get more information, professional tips and advice.