Can a more than 2% shareholder/employee of his S-Corp use the mileage rate deduction for auto use on the auto he drives in the business?

[sjrcpa]

The S corp can reimburse him, under an accountable plan, for business use of his vehicle using the standard mileage rate.

[Roader]

According to the Code he can’t as a more than 2% owner but has to use actual expense .

[sjrcpa]

For reimbursement?

You may be correct.

[qbteachmt]

"According to the Code he can’t as a more than 2% owner but has to use actual expense ."

Which code, or pub, did you find that?

What you did not clarify is: who owns the vehicle?

If it is a personally-owned vehicle, he would submit under An Accountable Plan, for reimbursement of business miles at the mileage rate per IRS, and that makes it not subject to payroll taxes or income taxes.

[TaxGuyBill]

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@Roader wrote:

According to the Code he can’t as a more than 2% owner but has to use actual expense .

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Citation?  I'm not aware of such a rule.

[HOPE2]

Form 1120-S - Standard Mileage Method for Vehicle Expenses

Generally, the S-corporation reimburses the employee for vehicle expenses incurred when using their personal vehicle for company purposes. Corporate employers may not use the standard mileage rate to compute the vehicle expenses for company-owned vehicles. However, they may use the standard mileage rate in determining the reimbursement to employees for business use of the employee's vehicle. This reimbursement would be considered a business expense deducted on the S-corporation return. Conversely, if the vehicle is owned by the S-corporation, the business is only allowed to deduct actual vehicle expenses (to the extent of business use).

[qbteachmt]

Exactly! Thank you, Hope.

You typically use the standard mileage allowance rate to reimburse employees, so that you don't support inequitable treatment by who drives which sort, type, or condition of vehicle and incurs what level of costs. Also, you cannot easily repay actuals for business use of a POV (personally owned vehicle) when that gas tank full might have been used to drive kids to school, go hunting, and also pick up a new tire for the tractor at a job site.

By using that standard mileage allowance rate, you have no need for proof of details of expenses. That's in parallel with an accountable plan for similar costs incurred, such as per diem. But, if you own more than 10 percent of the corporate entity, you may not use the daily per diem allowance that covers lodging, meals, and incidentals.

On the other hand, the actual costs to own and operate a company-owned vehicle are fairly easy to determine.

"allowed to deduct actual vehicle expenses (to the extent of business use)"

Personal use of a company-owned vehicle is a taxable fringe benefit, charged through payroll. The company tracks all costs, but their expenses are reduced by amounts charged to employees as a fringe benefit. Example: You run a fleet of trucks for a construction firm, that also are available to use personally during hunting season = taxable fringe benefit.

And none of this helps with what the OP asked. There is a 2% rule related to health insurance premiums...

[HOPE2]

you are very welcome!

[jgcpa]

Regarding your question if a more than 2% shareholder/employee of his S corp use the mileage rate deduction for auto use drives for business... What if the the S corp does not reimburse due to lack of cash, Can the S corp take the deduction for mileage and credit Additional Paid in Capital?

[qbteachmt]

It appears @jgcpa posted their own topic on the same issue here:

https://accountants.intuit.com/community/proseries-tax-discussions/discussion/unreimbursed-mileage-b...

No need to answer here and there. Let's avoid duplicates. Thanks.