Posts Tagged ‘standard mileage’

How To Drive For Business And Save On Your Tax Bill

Monday, February 2nd, 2015
Deducting expenses related to your car or truck is an allowable business expense – as long as the vehicle is used for business purposes.

Deducting expenses related to your car or truck is an allowable business expense – as long as the vehicle is used for business purposes.

If you are one of the many men and women who drive their personal vehicles for business, don’t forget to claim the appropriate tax deduction on your tax return – the savings just might help you keep more cash in your bank account and more gas in your tank.

Here’s what you need to know. …

Deducting expenses related to your car or truck is an allowable business expense – as long as the vehicle is used for business purposes. And if you use it exclusively for business purposes, you may be able to deduct the full cost of your vehicle. But before you start claiming deductions on your tax return, make sure you understand what the IRS considers to be a valid business purpose. Hint: Commuting from your home to work is not considered a valid business purpose.

When To Claim A Deduction

Do – claim a deduction if you use your vehicle for travel between two places of business.

Do – claim travel expenses that result from traveling from one job to another, traveling from one customer or client to another and traveling from your office or business location to perform other business tasks.

Do – claim your travel expenses that accrue between your home and a business destination if you have a home office that is considered your primary place of business.

Which Deduction Is Better?

There are many factors to consider when choosing a deduction method that will result in the most tax savings. The two biggest factors are the cost of the vehicle and how many business miles you drive each year. Here are the nuts and bolts of your two options:

  • Standard Mileage Method – If you keep good notes, then you may prefer the standard mileage method to keep track of your deduction. Here’s how it works: Start by keeping a log or a journal of all your business trips – include who, what, when and where. Then add up all the miles you racked up on your trips and multiply that number by the IRS’s standard mileage rate – which currently stands at 57.5 cents per mile. For example: if you were to drive 15,000 business miles over the year, you can multiply that number by 57.5 cents per mile to claim an $8,625 deduction.
  • Actual Costs Method – This method requires that you to keep track of all costs associated with your vehicle, including depreciation, repairs, maintenance, gas, tires, etc. When you have collected all these costs and arrived at a total, multiply this number by the percentage of time the vehicle is used for business purposes. Your deduction is limited to the percentage of time the vehicle was used for business purposes.

So, which deduction method is better?

Say you purchased a car for $30,000 and you use it exclusively for business purposes. You have figured that you drive about 10,000 miles for business each year. If you use the standard mileage method, you could claim a $5,750 deduction each year. But if you were to use the actual costs method, instead you would find that during the first five years of owning the car the actual vehicle expenses significantly add up to a larger tax deduction.

If you use your vehicle for business purposes, a financial advisor can help you identify the best route to maximize your tax savings. Email Rea & Associates to learn more.

By Tom Jeffries, CPA (Millersburg office)

 

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New Year, New Mileage Rates

Thursday, December 11th, 2014

Every mile you drive for business will be worth a little more next year, according to a recent IRS announcement. Beginning Jan. 1, 2015, the optional standard mileage rate for those calculating the deductible costs of driving for business will be 57.5 cents, which is up from 56 cents.

Based on a study of the fixed and variable costs associated with operating an automobile, the standard mileage rates take into consideration vehicle depreciation, insurance, repairs, maintenance, gas, etc. However, if you don’t intend on tracking your mileage, you also have the option of claiming deductions based on the actual costs of using your own vehicle rather than the standard mileage rates. Just be aware that you will not be allowed to claim both.

For example, if you have plans of claiming an accelerated depreciation on your vehicle, then you will not be able to claim the business standard mileage rate as well. If you are a business owner, you should also note that the standard rate is not available to fleet owners, or those who use more than four vehicles simultaneously. Additional details and rules can be found in Revenue Procedure 2010-51.

While the standard mileage rate for the business miles you drive will increase in 2015, those who use their vehicles for medical or moving purposes will see a reduction of half a cent in their mileage rates. Starting Jan. 1, the miles you drive for medical or moving purposes will be calculated at 23 cents per mile driven. And those driving their vehicles as a service to charitable organizations may calculate their deductions at 14 cents per mile driven.

Also in its announcement, the IRS noted an adjustment to the standard automobile cost allowable under the fixed and variable rate (FAVR) plan, which considers the costs taxpayers incur by driving their own vehicles for work-related purposes. In 2015, standard automobile costs may not exceed $28,200 or $30,800 for trucks and vans.

Do you use your vehicle for business? Make sure you track of your mileage. Every mile you travel is an opportunity to realize real tax savings. Our expert financial advisors can help professionals like you find opportunities you never even knew existed. Email Rea & Associates today and start the New Year out right.

By Lesley Mast, CPA (Wooster office)

 

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Do you use your personal vehicle for business purposes when you’re on the clock? Or do you use your vehicle medical, moving or charitable purposes? If so, did you know that you can claim a tax deduction on the mileage you rack up?  (more…)

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