Auto Expenses Can Be A Very Valuable Tax Write Off
If you have a car and you use it for business, you have two ways to take deductions:
1. Deduct the actual business-related costs of gas, oil, lubrication, repairs, tires, supplies, parking, tolls, driver salaries, and depreciation.
2. Use the standard mileage deduction and simply multiply by 55 cents for 2009 travel. (The rate for 2008 was 50.5 cents for the first six months and 58.5 cents for the last six months of the year) by the number of business miles traveled during the year. Your actual parking fees and tolls are separately deductible under this method.
For some taxpayers, the standard mileage rate produces a larger deduction. Others fare better tax-wise by deducting actual expenses. The actual method allows you to claim accelerated depreciation on your car, subject to limits and restrictions not discussed here. The standard mileage amount includes an allowance for depreciation.
Opting for the standard mileage method allows you to bypass the limits and restrictions and is simpler, but often less advantageous in dollar terms. The standard rate may understate your costs, especially if you use the car 100% for business, or close to that percentage. Once you choose the standard mileage rate, you cannot later use accelerated depreciation if you opt for the actual cost method in a later year. You may then use only straight line. Generally, the standard mileage method benefits taxpayers who have less expensive cars or who travel a large number of business miles.
Keep careful records of your travel expenses. You won’t be able to determine which of the two options is better for you if you don’t know the number of miles driven and the total amount you spent on the car. Furthermore, the tax law requires that you keep travel expense records and that you give information on your return showing business versus personal use. If you use the actual cost method, you must keep receipts.
Consider using a separate credit card for business travel to simplify your record-keeping. You can also deduct the interest you pay to finance a car for business use if you’re self-employed.
Self-employed people and employees who use their cars for business can deduct auto expenses if they either 1) don’t get reimbursed, or 2) are reimbursed under an employer’s “non-accountable” reimbursement plan. In the case of employees, expenses are deductible to the extent that auto expenses (together with other “miscellaneous itemized deductions”) exceed 2% of adjusted gross income.
We own a small business that we operate as a C-Corp. My husband also works on the side as a sole proprietor for other companies (same line of work). We use our vehicles for work (both the C-corp and the schedule C jobs), mostly my husband’s car but a little of mine. We personally own the vehicles and we pay the payments/interest, taxes/registration, personal/schedule C gas and maintenance, and the insurance. The business did not pay these things and it does not own our vehicles. The C-corp business did pay for it’s gas and it did pay for some maintenance. The business did not reimburse us for mileage, payments/interest, insurance, taxes/registration for use of rvehicles. The C-corp business claims the mileage on it’s tax return and we claim a small portion on our schedule C for the side work. It seems that we are still personally out something here. The C-corp busness is getting to claim deductions for the use of our personal vehicle, but we are not getting anything here except for a vehicle with extremely high mileage on it at the end of the year. What is the best way to handle this for max benefit to both us and the business? In the prior year, our CPA did not have the business claim any mileage becuase the business was new and did not have much of a profit and did not owe any taxes so she said to leave it off.
Need more info, like mileage and split between personal use and business use, however you can consider taking the mileage yourself if it is big enough to warrant, or take the percentge approach, better for your CPA to figure out what’s best, she has more information, trust her or replace her. This is easy stuff, figure out what’s best for you and do it, the corp has little to gain as you are paying the bills and own it.