Automobile Expenses - Tax Write-Offs

#1. Automobile Expenses - Tax Write-Offs

Automobile Expenses - Tax Write-Offs

If you use a vehicle for conducting business, you can deduct safe bet automobile costs from your tax bill. This is true even if you use the vehicle for personal and enterprise needs.

Automobile Expenses - Tax Write-Offs

Automobile Deductions

The powers that be have historically written sections into the tax code promoting enterprise activities. One of the former write-offs has all the time been the expenses associated with using a vehicle for enterprise purposes.

The simplest automobile write-off 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 enterprise reasons.

Where you use a vehicle for both personal and enterprise reasons, you can only deduct expenses associated with the enterprise use. Keep in mind that driving to and from work is not thought about enterprise mileage, while driving from an office to meet a client is thought about enterprise mileage.

There are two methods for determining deductible automobile tax expenses. The first is a uncomplicated calculation known as the suitable mileage deduction. The second is the actual expenses method. You can pick whichever deduction provides you with the biggest deduction unless you lease the car. With a lease, you must use the suitable mileage deduction.

The suitable mileage rate deduction is a calculation wherein you multiply your total enterprise 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 singular tax year. Automobile 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 suitable mileage deduction.

Regardless of the method you choose, you must document the expenses you hope to write off on your vehicle. This means keeping a mileage book and receipts of anyone you intend to deduct.

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