For small business owners, the use of their vehicles can be an important part of their business growth. Meetings with clients, vendors and perspective investors are just some of the ways a vehicle can be used in service of a business. However, there are other uses that you should keep track of that can also be a deduction on your tax return. So it is important to work with your tax professional or accountant, such as Brian Walsh in Mahwah, NJ, to determine what type of use will be eligible based on your circumstances. Here are 5 areas to consider when tracking the use of your vehicle.
Business Trips
For many individuals, the business of driving to meetings, to the airport for travel and even general errands for supplies can all be counted as business use of your vehicle. In this case, you will want to keep a notebook in your car to track the number of miles driven for business related purposes and also to hold any gas receipts, parking receipts and toll receipts. If no receipts are given for tolls, you will still want to note them in your mileage book.
Travel from your home office to meet with clients or vendors can also be counted. However, the mileage for commuting from home to your office would not be eligible. In addition, if your employer reimburses you for the mileage, then it would not be deductible either.
Charitable Donations
Many taxpayers recognize that those donations to a local charity are deductible, but so is the use of your vehicle in behalf of the charity. Running errands or meeting with donors as part of your volunteering can all be potential deductible expenses.
Therefore, it is important to track this mileage as you would any business mileage, but be sure to note the charity and the reason for the errand. Also, be sure to get receipts or letters of acknowledgement form the charity that document your efforts in their behalf as backup for your own records. This will provide the necessary information to support your deduction in case of an audit.
Medical Purposes
If you are traveling in your vehicle for a reason beyond work, such as a medical procedure, you may be able to deduct the mileage from these trips. Keep in mind, you will need to track the purpose of the mileage and it cannot be reimbursed from another source. However, it can be added with your medical expenses, so keep track throughout the year.
Relocating Your Household
If you are relocating your household for a job or medical reasons, then you want to keep track of the mileage on your vehicle. The expense may be deductible as part of your moving expenses. To qualify, you must be moving at least 50 miles more than the distance between your old home and your job. However, as with any of these potential deductions, it is important to keep good records, including receipts and notes about the amount of mileage and the reason. Working with your tax professional, you should be able toto determine if any of your expenses qualify.
Actual Expense versus Standard Mileage
The IRS allows you take your deduction for auto expenses in one of two ways. The first is by means of a standard mileage deduction, where the IRS accentually give you a rate of deduction per mile. Your tax professional will know what the current rate is for the applicable tax year. Keep in mind, however, that this will mean other expenses will not necessarily qualify for a deduction.
Using the actual expense option, you will be able to deduct parking fees, tolls, depreciation, interest on your vehicle loan, registration fees, routine maintenance and basic repairs (which include tires and oil changes), fuel, lease and rental expenses, as well as insurance. However,, you cannot deduct tickets or fines related to operating the vehicle and you must deduct a portion for any personal use. You will also be unable to claim mileage with this option. Working with your tax professional or accountant, you can determine which option will work best for your circumstances.
As we have seen, your vehicle may be a source of tax deductible expenses based on what you use it for. Keep in mind that it is key to keep good records if you are claiming these expenses in case of an audit. Still, it can be a way to reduce that tax liability for the year.
Click on the link below to contact the office of Brian Walsh in Mahwah, NJ, to determine if you might be able to claim a deduction based on your automobile.
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