Do you use your personal vehicle for business purposes? Typically, you can deduct the cost of any work-related travel on your taxes as a business expense. If, however, you rarely use your personal car or truck for work, it may not be worth all the trouble of calculating and deducting that expense. On the other hand, if you take long or frequent trips, deducting business travel costs can spell good news for your tax liability. Read on to find out more!
Deductions Based on Standard Mileage Rate
Each year, the IRS factors in the cost of gas and the cost of maintaining and running a vehicle to arrive at a national standard mileage rate. For the tax year 2017, the standard mileage rate is 53.5 cents per mile driven for business purposes. So, for every 10 miles driven for work (and not otherwise reimbursed by an employer), you can deduct $5.35 as a business expense.
Deductions Based on Actual Expenses
If you want to make sure that you are getting the greatest tax benefit when it comes to using your car for business, you may want to consider calculating your actual expenses rather than using the standard mileage rate generated by the IRS. This way, you can compare the two figures and use the one that benefits you the most.
Expenses can include:
- Gas
- Oil
- Repairs
- Maintenance
- Depreciation and improvements
- Vehicle repair tools
- Insurance
- License fees
- Auto club dues
If you drive a vehicle that is expensive to run and maintain, choosing the actual expense method could be a good choice. Just know that you’ll have to do lots of record-keeping and calculations if you opt for this method!
The other thing to keep in mind is this: If you choose to use the actual rate in the first year you have the vehicle, you’re locked into using the actual rate every single year while you own that vehicle. If you use the standard mileage rate in year one, you can switch back and forth between that standard rate and the actual expenses from year to year based on which one serves you best.
The team at Taxation Solutions, Inc. can help you determine which method of calculating your vehicle expenses will be most beneficial. We are here to help individuals and businesses in Charlotte navigate the tax code and make informed decisions about how to file. Call us today to find out more!