Using a vehicle for your own business, or using your own vehicle for work purposes for your current employer is a common occurrence. If you do either of these, chances are you already know that you are entitled to certain deductions when you file your taxes. But knowing which deductions to take and how best to calculate them isn’t always clear. An accountant can help, of course, but if you do your taxes yourself each year, it pays to know exactly what deductions you are entitled to so that you can receive the correct savings.
What qualifies your vehicle as a business vehicle?
If you purchased a vehicle that is used solely for business purposes, such as a van for catering or a pickup truck for construction, then you own a business vehicle. If you own a car or other vehicle that you use part of the time for business purposes, and part of the time for personal use, then you can still claim deductions, but the calculations will be more detailed.
Can you write off depreciation?
You can write off depreciation for cars you own and use for business based on the value of the car, up to a certain limit. The limitation varies according to the type of vehicle, and whether it is brand new or used. The amount you can write off for depreciation also varies according to how often you utilize the car for business. Many tax programs can accurately calculate the proper depreciation cost for you.
How do you write off mileage?
If you use a vehicle often or all of the time for business, it is important to keep track of your mileage and gas expense as accurately as possible. It may be helpful to keep a little pad in the glove compartment that you can record mileage on for each trip.
When you write off mileage, you are given a choice of writing off actual expenses or using the standard mileage rate. Typically, the standard mileage rate will provide you with a larger deduction, unless you operate a vehicle that often needs maintenance and repairs. If that is the case, then it may be more beneficial to deduct actual expenses.
According to the IRS, the current standard mileage rate is as follows:
- 54 cents per mile for business miles driven
- 19 cents per mile driven for medical or moving purposes
- 14 cents per mile driven in service of charitable organizations
When you calculate the standard mileage for tax purposes, you will need to input the total number of miles you have driven the vehicle for the year, and the total number of miles that pertained only to business use if the vehicle was also driven for personal use.
Can you deduct commuting miles and expenses?
There are no deductions simply for driving a vehicle to and from your place of employment, or for expenses incurred from parking at your place of employment. You can, however, deduct expenses for commuting from one office to another, traveling to a business meeting, and for any business-related travel outside your general area. Similarly, running business-related errands, such as driving to the bank for your job, or picking up supplies, can also be deducted.
Deductions for leasing a car and car loans
If you lease a car rather than own it, you can also deduct the cost of the lease. Additional auto-related deductions include property tax fees, costs of registration, and auto loan interest.
It can be beneficial to speak with an experienced accountant before doing your taxes, so that you are certain to be fully informed on how best to apply auto-related deductions. At BWTP, we pride ourselves on the service experience of our clients and the ability to work with each client, individually, and their specific tax situation. Call us today for a consultation!