Deducting Vehicle Expenses for Your Business

Deducting Vehicle Expenses for Your Business

Deducting Vehicle Expenses for Your Business

Business traveling costs add up fast. If you own a vehicle that is primarily for business use, there are tax deductions available to you. You can choose to deduct the standard mileage rate or actual expenses. If you are unsure of what option is best for you, consider the following:

Standard Mileage Rate

For 2012, the standard mileage rate is 55.5 cents per mile. If you own a vehicle, you can use this deduction beginning with the first year that you place your vehicle in service. If you are leasing your vehicle, and use this deduction, you must use it for the entire period that you lease the vehicle. This means that you cannot switch between the standard mileage deduction and the actual expenses deduction[1].

With the standard rate, you can deduct miles driven as well as toll expenses and parking fees. You cannot deduct depreciation expenses, fees for leasing and renting or vehicle operating expenses[1].

Actual Expenses

The Standard Mileage Rate does not require as much record keeping as the actual expense deduction, but this deduction may be more beneficial if you keep a detailed record of your expenses.

The actual expense deduction allows you to deduct fuel costs as well as insurance, oil, maintenance, license plates, and other operating costs. You cannot take this deduction if you deduct the standard mileage rate. If your business uses at least 5 vehicles or if you use your vehicle for transporting purposes, you only have the option of taking this deduction and not the standard mileage deduction[1].

Also, deductions are available to you for purchasing vehicles for business purposes. However, before hoping for a deduction after purchasing the latest sports car or a cargo truck, realize that there are some requirements to qualify. The weight of the vehicle purchased must be over 6000 pounds, but not over 14,000 pounds gross weight. The vehicle must seat no more than 9 people and must not have a cargo area of more than 6 feet in length not attached to passenger area. There is also a $25,000 yearly limit for this deduction[2].

Decide in advance which deductions you want to use so that you will have proper records when it’s time to file your tax return.

Sources:
[1] 1040 Schedule C Line 9 Instructions. http://www.irs.gov/pub/irs-pdf/i1040sc.pdf
[2] Form 4562 Instructions page 13. IRS. Web. August 2011. http://www.irs.gov/pub/irs-pdf/i4562.pdf

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Alan Olsen, CPA

Alan Olsen, is the Host of the American Dreams Show and the Managing Partner of GROCO.com.  GROCO is a premier family office and tax advisory firm located in the San Francisco Bay area serving clients all over the world.

 

Alan L. Olsen, CPA, Wikipedia Bio

 

 

GROCO.com is a proud sponsor of The American Dreams Show.

 

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The American Dreams show was the brainchild of Alan Olsen, CPA, MBA. It was originally created to fill a specific need; often inexperienced entrepreneurs lacked basic information about raising capital and how to successfully start a business.

Alan sincerely wanted to respond to the many requests from aspiring entrepreneurs asking for the information and introductions they needed. But he had to find a way to help in which his venture capital clients and friends would not mind.

The American Dreams show became the solution, first as a radio show and now with YouTube videos as well. Always respectful of interview guest’s time, he’s able to give access to individuals information and inspiration previously inaccessible to the first-time entrepreneurs who need it most.

They can listen to venture capitalists and successful business people explain first-hand, how they got to where they are, how to start a company, how to overcome challenges, how they see the future evolving, opportunities, work-life balance and so much more.

American Dreams discusses many topics from some of the world’s most successful individuals about their secrets to life’s success. Topics from guest have included:

Creating purpose in life / Building a foundation for their life / Solving problems / Finding fulfillment through philanthropy and service / Becoming self-reliant / Enhancing effective leadership / Balancing family and work…

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MyPaths.com (Also sponsored by GROCO) provides free access to content and world-class entrepreneurs, influencers and thought leaders’ personal success stories. To help you find your path in life to true, sustainable success & happiness.  I’s mission statement:

In an increasingly complex and difficult world, we hope to help you find your personal path in life and build a strong foundation by learning how others found success and happiness. True and sustainable success and happiness are different for each one of us but possible, often despite significant challenges.

Our mission at MyPaths.com is to provide resources and firsthand accounts of how others found their paths in life, so you can do the same.

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