Unlock hidden tax deductions for business vehicle use, strengthen rental property savings with 1099s, and access tax-free cash from life insurance:
- If you’ve used your personal vehicle for business—whether you’re a sole proprietor or you received mileage reimbursement from your S or C corporation—there may be a valuable tax deduction waiting for you
- Filing 1099s helps position your rental activity as a trade or business—a critical step if you want to claim the 20% Section 199A deduction or deduct repairs under the de minimis safe harbor
- Could you use a quick infusion of tax-free cash? Your life insurance policy may provide one. And you don’t have to die to collect
Personal Vehicle Used for Business Can Produce a Big Surprise Deduction
If you’ve used your personal vehicle for business—whether you’re a sole proprietor or you received mileage reimbursement from your S or C corporation—there may be a valuable tax deduction waiting for you.
When you use the IRS standard mileage rate (or when your corporation uses it to reimburse you), the mileage rate is not just a substitute for gas and maintenance. You’re also claiming “embedded depreciation”—a hidden deduction built into the mileage rate.
Here’s where the surprise comes in: when you sell or trade in that vehicle, you could be eligible for a significant additional deduction tied to that depreciation.
Let’s say you bought a $50,000 vehicle in 2021 and used it 80% for business. Over the past 4.5 years, you have accumulated nearly 40,000 business miles and deducted or been reimbursed based on the IRS mileage rate. You then sell the vehicle for $20,000.
By calculating the business-use portion of the sale and subtracting your embedded depreciation, you might unlock a $12,937 ordinary loss—fully deductible against your other income, under Section 1231 of the tax code.
This isn’t a tax loophole—it’s standard tax law, but it’s often overlooked. And it only applies if your vehicle was:
- deducted or reimbursed using the standard mileage rate,
- used at least partially for business, and
- sold or traded in after accumulating depreciation.
Why Landlords Should File Form 1099-NEC
If you own rental property, you may have heard that you’re not required to file Form 1099-NEC for contractors, such as plumbers or handymen. While that’s often true, choosing not to file could be costing you valuable tax savings.
Filing 1099s helps position your rental activity as a trade or business—a critical step if you want to claim the 20% Section 199A deduction or deduct repairs under the de minimis safe harbor.
Here’s how it works:
- Section 199A allows a 20% deduction on net rental income—but only if your rental qualifies as a business. Filing 1099s supports that claim, and it can be worthwhile. For example, $20,000 in rental income could mean $4,000 in deductions—saving you nearly $1,000 at a 24% tax rate.
- The de minimis safe harbor allows you to deduct repair and maintenance costs (up to $2,500 per item) immediately rather than depreciating them over several years. But again, this applies only if the tax code treats your rental activity as a business.
The IRS has made clear that failing to file 1099s may weaken your ability to claim these benefits. Fortunately, this is something you can address proactively.
Life Insurance: You Don’t Have to Die to Collect
Could you use a quick infusion of tax-free cash? Your life insurance policy may provide one. And you don’t have to die to collect.
To access money from your life insurance policy without dying, you must have the right type of policy—a permanent life insurance policy that lasts your entire life, such as whole life, universal life, variable life, or indexed universal life. A cheap term life policy doesn’t provide any lifetime cash benefits.
Permanent life insurance includes a savings component. The insurance company puts a portion of your premiums into a cash value account, and this sum grows over time on a tax-deferred basis.
There are several different ways to tap into your policy’s cash value while you’re still alive:
Partial Withdrawals. You can make partial withdrawals from your policy’s cash value account. Many insurers cap withdrawals at 75% to 90% of the total cash value. Withdrawals up to the account’s cost basis (total premiums paid) are tax-free. You pay tax at ordinary rates on withdrawals over your cost basis. You don’t have to repay the withdrawals, but they will reduce the policy’s death benefit if they are not repaid.
Surrender Your Policy. You can surrender your policy to your insurer, who will pay the total amount of the cash value account, less fees (which can be substantial if the policy is less than 10 to 15 years old). The payment is taxable at ordinary income rates to the extent it exceeds the total premiums paid.
Take Out Loans. You can take out loans from your insurer using your policy’s cash value as collateral. Such loans often have lower interest rates than bank loans, and they are tax-free. Borrowing from your insurer does not affect your policy’s cash value—it will continue to earn interest and grow tax-free. You aren’t required to repay the loan, but if unpaid, it will reduce your policy’s death benefit.
Sell Your Policy To A Third Party. You may be able to sell your policy to a third party, who will then make the premium payments and collect the death benefit when you die. This option is available only to older policyholders (over age 65) or those who are terminally ill or disabled. The sale proceeds for life settlements are taxable to the extent they exceed the premiums paid. But “viatical settlements” (those made by terminally ill or disabled policyholders) are tax-free.
Contact your tax and financial advisors to determine the best moves for your situation.