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Proper Expensing for your Business Vehicle

You map out the most direct route to your client’s office with your navigation system. You use your hands-free cell phone to make business calls on the way to your meeting. You are prepared with samples of your product in your trunk. In short, your car is your mobile office…It’s also a tax deduction. Here’s what you need to know to benefit from your office on wheels.

Qualifying for the Deduction:  You can deduct auto expenses when you own or lease a vehicle and use it for business.  Deliveries to customers, traveling to business meetings, and trips to the office supply store qualify as business use. However, commuting generally doesn’t qualify for deductions, even if you discuss work on your phone while stuck in traffic.

Calculating My Deductions: You have two alternatives for calculating the deduction — actual costs or the standard mileage rate. If you choose standard mileage in the first year you use a vehicle you own for business, you can usually switch to actual costs in later years. Choosing standard mileage for a leased vehicle locks you in to that method for the term of the lease.

What’s deductible? Under the actual cost method, deductible costs include the business use portion of depreciation, maintenance, gasoline, taxes, insurance, parking fees, and interest expense.

Rates: The standard mileage rate for business use during 2013 is 56.5¢ per mile. In addition, you can deduct the business portion of parking fees, tolls, certain taxes, and, if you’re self-employed, interest on your vehicle loan.

How to benefit: Maintain a log of business and personal mileage and keep receipts. Having both lets you pick the method that generates the largest tax deduction.

Contact your tax advisor if you would like additional information about deductions for your business vehicle.

By | 2017-05-24T13:42:32+00:00 August 5th, 2013|Articles, Business Advice, Tax Planning|0 Comments

About the Author:

Jill Massey, CPA, MST is a Tax Principal at Gumbiner Savett Inc who specializes in tax planning, compliance, and tax controversy for construction, manufacturing, real estate, and nonprofit organization clients. With extensive experience in all areas of tax compliance and consultation, Jill focuses a significant part of her practice on partnership taxation and real estate investments.

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