Business Automobile Expenses
Brigitte A. Thompson
© 2004
The miles that you drive
which are related to the operation of your business,
or the actual expenses required to maintain your automobile
can
be deducted from your income at tax time. There are two ways
you can utilize your vehicle as a business deduction.
METHOD 1- An IRS Adjusted
Mileage Allowance. During 2004, you can use
37.5 cents per mile. With this method you need to keep track
of the miles
you drive which are exclusively for business purposes.
In order to claim this
deduction, the IRS requires you to keep a written
log. On this you will need to record the date of the trip, your
beginning
odometer reading, the ending odometer reading, the total miles
driven,
your starting location, your destination, as well as define your
purpose
for the trip.
METHOD 2- The Actual Expense
Deduction. To claim your automobile deduction with this method,
you need to keep track of all receipts
related to the operation of your business vehicle. You can include
in
this amount gasoline, oil, repairs, license, insurance, depreciation,
parking fees, and tolls. The downside of this method is that
you can only
deduct a portion of these expenses as a business expense. That
portion
is determined by looking at the total miles driven for business
and
comparing that to the total miles the car traveled that year.
For each trip, either
business or personal, you need to record the
appropriate information in your written mileage log.
It is important to note
that the IRS has specific rules on this deduction. If you choose
in your first year of business to use
the
Actual Expense method, you may not switch to the IRS Adjusted
Mileage
Allowance in a later year on that same car.
If you choose IRS Adjusted
Mileage Allowance in the first year of
business, you lose the ability to take a great first year depreciation
expense on your car. However, it is possible to switch from the
IRS
Adjusted Mileage Allowance method to the Actual Expense method
in later
years and depreciate your car with a smaller deduction using
the straight
line method of depreciation.
With accurate records, either method can create a nice tax deduction!
All information
is based on the current federal tax laws of the United
States. Since these laws are subject to change, neither the
author nor
BusyParentsOnline.com assume liability for modifications
that occur after
the creation of this work. Every effort has been made to
ensure this information is as accurate and complete as possible. These
articles contain general information for businesses and are
offered as
an overview
of the law.
