What expense category does vehicle maintenance come under?

Vehicle maintenance is an essential aspect of running a business that relies on transportation. But how should these expenses be categorized in your financial records? Understanding where vehicle maintenance fits can help you keep accurate books and make informed financial decisions.

Classifying vehicle maintenance expenses

Vehicle maintenance typically falls under operating expenses in your financial statements. These are recurring costs necessary for the day-to-day functioning of your business. Here's how to categorize them:

• Routine maintenance: Includes regular services like oil changes, tire rotations, and inspections.
• Repairs: Costs for fixing issues that arise during normal vehicle use.
• Fuel and insurance: Ongoing expenses directly related to operating your vehicles.
• Minor upgrades: Small enhancements that don't significantly extend the vehicle's life.

However, if you're making significant upgrades or major repairs that extend the vehicle's useful life, these expenses might be considered capital expenditures.

Examples of vehicle maintenance expenses

To help you better understand, here’s a breakdown of some typical vehicle maintenance expenses you might encounter:

• Oil and filter changes
• Brake repairs
• Tire replacements
• Engine tune-ups
• Transmission repairs
• Replacing windshield wipers and batteries

If your business spends $500 on a brake repair for a company vehicle, this expense would typically be classified under operating expenses.

Tax implications of vehicle maintenance

Here are the tax benefits you can capitalize on by properly categorizing your vehicle maintenance expenses:

• Deductible expenses: Most routine maintenance and repair costs are tax-deductible in the year they're incurred.
• Capital expenditures: Major upgrades may need to be capitalized and depreciated over time.

Be sure to keep accurate records and you can consult with a financial advisor or accountant to understand how these expenses affect your specific tax situation.

Let Ramp automate your expense process

Keeping track of vehicle maintenance expenses doesn't have to be a hassle. Ramp can automate the categorization, tracking, and management of these costs. With real-time expense tracking and smart categorization, Ramp simplifies your bookkeeping, so you can focus on running your business.