Deducting Business Related
If you are self-employed and use
your car for business, you can deduct certain business-related
There are two options for claiming deductions:
Actual Expenses. To use
the actual expense method, you need to figure out the actual
costs of operating the car for business use. You are allowed
to deduct the business-related portion of costs related to
gas, oil, repairs, tires, insurance, registration fees,
licenses, and depreciation (or lease payments).
Standard Mileage Rate. To
use the standard mileage deduction, multiply 58 cents (in
2019) by the number of business miles traveled during the
Car expenses such as parking fees and tolls attributable to
business use are deducted separately no matter which method
WHICH METHOD IS
For some taxpayers, using the standard mileage rate produces a
larger deduction. Others fare better tax-wise by deducting
actual expenses. You may use either of these methods whether
you own or lease your car.
To use the standard mileage rate for a car you own, you must
choose to use it in the first year the car is available for
use in your business. In subsequent years, you can choose to
use the standard mileage rate or actual expenses. If you
choose the standard mileage rate and lease a car for business
use, you must use the standard mileage rate method for the
entire lease period - including renewals.
Opting for the standard mileage rate method allows you to
bypass certain limits and restrictions and is simpler;
however, it's often less advantageous in dollar terms.
Generally, the standard mileage method benefits taxpayers who
have less expensive cars or who travel a large number of
The standard mileage rate may understate your costs,
especially if you use the car 100 percent (or close to it) for
Tax law requires that you keep travel expense records and that
you show business versus personal use on your tax return.
Furthermore, if you don't keep track of the number of miles
driven and the total amount you spent on the car, your tax
advisor won't be able to determine which of the two options is
more advantageous for you at tax time. It is essential to keep
careful records of your travel expenses (if you use the actual
expenses method you must keep receipts) and record your
You can use a mileage logbook or if you're tech-savvy, an app
on your phone or tablet. A number of phone applications (apps)
are available to help you track your business expenses,
including mileage and billable time. These apps also allow you
to create formatted reports that are easy to share with your
CPA, EA, or tax preparer.
To simplify your recordkeeping, consider using a separate
credit card for business.
If you have any questions or would like more information about
which deduction method is best for your particular tax
situation, please contact the office for assistance at
SMEED CPA Financial
Services To Help Clients With
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