Nobody enjoys writing checks to Uncle Sam. This year, the experts at Thornton Chevrolet suggest researching whether you can add an extra deduction to your state and local taxes by purchasing a new car. These deductions cover transportation expenses for any business. Many vehicles used for business tax deductions will have the logo or contact information of the business attached onto the car or truck.
According to the United States Internal Revenue Service, there are five guidelines and rules to follow before claiming the costs of a vehicle as tax-exempt.
- The car can be used when traveling from one work location to another within the entire city of where the business is located.
- The car can be used to visit customers.
- The car can be used while attending a business meeting away from the regular workplace.
- The car can be used when traveling from home to a temporary workplace when the taxpayer has one or more regular places of work.
- The car cannot be used for costs relating to a taxpayer’s commute from home to the workplace; these are considered commuting expenses and are not deductible.
There are two methods to claim tax deductions on vehicles. Both methods require detailed record keeping of a vehicle log.
Standard Mileage Rate Method
The standard mileage rate method is used when the driver of the vehicle keeps a mileage log. The standard mileage rate is adjusted annually by the IRS and provides a simple way to claim a business vehicle on a tax deduction.
In recent years, the cost per mile has averaged around fifty cents. The business owner reports the amount of miles traveled by the vehicle for business expenses.
The drawback of the standard mileage rate method is that it does not deduct actual expenses, such as depreciation, lease payments, maintenance and repairs, gasoline, oil, insurance, or vehicle registration fees. These additional costs can add up and can sometimes deter business owners from using the standard mileage rate method.
Actual Expenses Method
An actual expenses method tax deduction can also be used for actual vehicle expenses. These expenses include depreciation, lease payments, registration fees, licenses, gas, insurance, repairs, oil, garage rent, tires, tolls, and parking fees. If the taxpayer uses the vehicle for anything other than business, they must keep track of the expenses incurred for business use and for personal use of the car or truck. Each expense is deductible for only the business use of the vehicle.
It is vitally important to keep complete records of all items claimed while filing taxes. The types of records depend on which type of method the business owner is using to claim the expenses; however, the more factual information available, the more likely a business owner is to receive the full tax deduction. All receipts, invoices, and other documentation that show cost and establish the identity of the vehicle should be retained by the business owner to increase their chances of receiving a large write off.
Tax deductions from business vehicles greatly help a business owner, so if you are in the Central Pennsylvania area, stop by Thornton Chevy today to see how they can help you select a new business vehicle. Thornton Chevrolet is a valuable resource for all your car questions and maintenance needs.