Whether you’re self-employed or an employee, if you use a car for business, you get the benefit of tax deductions.
There are two choices for claiming deductions:
For some taxpayers, using the standard mileage rate produces a larger deduction. Others fare better tax-wise by deducting actual expenses.
Tip: The actual cost 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 certain limits and restrictions and is simpler– but it’s often less advantageous in dollar terms.
Caution: The standard rate may understate your costs, especially if you use the car 100% for business, or close to that percentage.
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 and record your mileage in a logbook. If you don’t know the number of miles driven and the total amount you spent on the car, we won’t be able to determine which of the two options is more advantageous for you.
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 for your auto deductions, you must keep receipts.
Tip: Consider using a separate credit card for business, to simplify your recordkeeping.
Tip: You can also deduct the interest you pay to finance a business-use car if you’re self-employed.
Note: Self-employed individuals 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 will help you determine the best deduction method for your business-use car. Let us know if you have any questions about which records you need to keep.
Silicon Valley
111 N Market St, Ste 300
San Jose, CA
Sacramento
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Copyright All rights Reserved. Financial Dream Team, like all providers of personal financial services is required by law to inform their clients of their policies regarding privacy of client information. The information in this material is not intended as tax or legal advice. Financial Dream Team, USA, LLC is a registered business in Califronia. Provided content is for informational purposes only.