Accounting for Auto Dealerships

Floor plan financing interest gets special, favorable treatment.

The business interest limitation of IRC §163(j) generally caps interest deductions at 30% of adjusted taxable income, but floor plan financing interest is added on top of that cap under §163(j)(1)(C), so it remains fully deductible.

“Floor plan financing indebtedness” is defined in §163(j)(9)(B) as debt used to finance the acquisition of motor vehicles held for sale or lease and secured by that inventory.

There is an important trade-off. Under IRC §168(k)(9)(B), a business that has floor plan financing can be excluded from bonus depreciation, though a dealership whose other interest is fully deductible without relying on the floor plan rule may still qualify. So the interest deduction and the depreciation deduction have to be weighed together.

This matters more than ever now that the One Big Beautiful Bill Act, signed July 4, 2025, restored 100% bonus depreciation permanently for qualifying property acquired after January 19, 2025.

We model both sides each year so you claim floor plan interest and fixed-asset deductions in the combination that actually lowers your tax.

Yes. Your finance and insurance (F&I) office and any reinsurance structure are where a dealership-focused CPA adds real value.

We account for finance reserve and participation income, extended service contracts, GAP, and credit insurance, each of which carries its own income-timing rules.

Many dealers also reinsure the F&I products they sell through a dealer-owned reinsurance company, often called a RIC.

Smaller reinsurance companies can elect under IRC §831(b) to be taxed only on their investment income rather than their underwriting profit, subject to the statute’s inflation-adjusted premium cap, and reinsurance companies domiciled offshore commonly elect under IRC §953(d) to be treated as U.S. taxpayers.

We help you evaluate, structure, and account for these arrangements, and we keep the documentation clean, so the profit your F&I office generates is captured and taxed efficiently rather than left on the table.

As you add rooftops or sell across state lines, your sales and use tax footprint grows quickly.

Each state sets its own rules for how vehicle sales are sourced, whether trade-in credits reduce the taxable amount, and how documentation (“doc”) fees and F&I products are taxed, and those rules change often.

We help you determine where you have nexus, register where required, and account for the tax collected and remitted so an audit in any state finds clean records.

We also coordinate the treatment of manufacturer holdbacks, floor plan credits, and factory incentives, which affect both your income timing and your state filings.

The result is one consistent set of numbers across every store and every state you operate in.

Yes. Our services scale from core dealership accounting to full outsourced CFO support as your business grows.

Beyond compliance, we build cash-flow forecasting, department-level budget-versus-actual reporting for new, used, service, parts, and F&I, and KPI dashboards that show where each profit center stands.

We support related finance company (RFC) and Buy Here/Pay Here accounting, Colorado Enterprise Zone credit planning, and the manufacturer financial-statement packages your factory requires.

When it is time to buy, sell, or transition the store to the next generation, we provide the valuation support, succession planning, and buy-sell due diligence family dealerships depend on.

Whether you need occasional advisory or a steady-state finance partner, we scope the engagement to your goals and budget.