Automobile Tax Expenses

The powers have historically written sections into the tax code promoting business activities. One of the traditional write-offs has always been the expense of using a vehicle for business purposes.

The most straightforward automobile tax expense situation is when 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. However, for many small businesses, a vehicle will be used for both personal and business reasons.

If you use a vehicle for personal and business reasons, you can only deduct the automobile expenses associated with the business use. Remember that driving to and from work is not considered business mileage while driving from an office to meet a client is considered business mileage.

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

The standard mileage rate deduction is a calculation wherein you multiply your total business mileage for the year by a figure provided by the IRS.

The actual cost expense option is exactly what it sounds like. It is the actual cost of using the vehicle for tax purposes for a particular tax year. Automobile tax 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 more extensive than the standard mileage deduction.

Regardless of the method you choose, it would be best to document the automobile tax expenses. This means keeping a mileage book and receipts of anything you intend to deduct.