Automobile Tax Expenses
If you use a vehicle for conducting business, you can deduct
certain automobile tax expenses from your tax bill. This is true
even if you use the vehicle for personal and business needs.
Automobile Tax Expenses
The powers that be have historically written sections into the
tax code promoting business activities. One of the traditional
write-offs has always been the expenses associated with using a
vehicle for business purposes.
The simplest automobile tax expense situation is one in which a
vehicle is used entirely for business. For example, if you have
a van used for a delivery service and nothing personal, all
expenses associated with the van can be written off. This is
known as the exclusive use situation. For many small businesses,
however, a vehicle will be used for both personal and business
reasons.
Where you use a vehicle for both personal and business reasons,
you can only deduct the automobile expenses associated with the
business use. Keep in mind that driving to and from work is not
considered business mileage, while driving from an office to
meet a client is considered business mileage.
There are two methods for determining deductible automobile tax
expenses. The first is a simple calculation known as the
standard mileage deduction. The second is the actual expenses
method. You can choose whichever deduction provides
you with the
biggest deduction unless you lease the car. With a lease, you
must use the standard mileage deduction.
The standard mileage rate deduction is a calculation wherein you
multiply your total business mileage for the year by a figure
provided by the IRS. For the first eight months of 2005, the
figure provided by the IRS is 40.5 cents per mile. For the last
four months of 2005, the figure has been bumped up to 48.5 cents
to reflect high gas prices.
The actual cost expense option is exactly what it sounds like.
It is the actual cost associated with using the vehicle for tax
purposes for a particular tax year. Automobile tax expenses will
include gas, tires, repairs, oil changes, registration costs,
licensing, insurance and so on. In many cases, the actual
expense deduction will end up being larger than the standard
mileage deduction.
Regardless of the method you choose, you must document the
automobile tax expenses. This means keeping a mileage book and
receipts of anything you intend to deduct.
About the author:
Richard A. Chapo is with http://www.businesstaxrecovery.com -
recovery of business taxes through tax help and tax relief.
Visit http://www.businesstaxrecovery.com/articles to read more
business tax articles.
Written by: Richard A. Chapo
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