07 Mar Deducting Vehicle Expenses for Your Business
The work you do for your business is not always done in the office. In fact, a great deal of the work you do will be in other locations as you network with other business owners, visit customers’ offices, and meet with suppliers. The miles that you drive for your business can add up quickly, as can the expenses. In addition to paying for gas for all those trips, you’ll need more frequent oil changes, tire rotations and replacements, and other routine maintenance.
But because those miles are essential to the growth of your business, the IRS provides a deduction for business owners who are driving any number of miles for business purposes.
Vehicle Deductions: The Options
There are actually two different ways that you can claim this deduction for your business:
- Standard Deduction: Receive a flat, per-mile deduction for every mile driven for business purposes. The 2017 standard deduction is $0.535.
- Actual Cost Deduction: Receive a deduction based on your actual vehicle expenses, including maintenance and repairs.
The one that you will want to use will depend on your specific circumstances, so we recommend that you consult with an expert when filing business taxes in Provo to determine which of these options will give you the best return.
Standard Mileage Deduction: How to Keep Records
As any CPA will tell you, you need to have records for every deduction, expense, and income source that you claim. Your mileage deduction is no different. If you wish to claim the standard mileage deduction for your business tax return, you need to keep detailed records for any driving that you do for your business. Create a spreadsheet and record the following information for any business-related trip:
- Purpose of the trip (meeting a client, attending a networking group, etc.)
- Odometer reading at beginning of trip
- Odometer reading at end of trip
- Total miles driven for the trip
You will also want to add a space to include the total miles driven that year, year-to-date totals, and weekly totals, for easy reference when filing your business taxes. Remember, you can only claim the deduction for miles drive for business purposes. In some cases, you may not qualify to claim the standard mileage deduction, so be sure to consult with one of our CPAs in Provo to find out if you qualify.
Actual Expenses Deduction: How to Keep Records
If you discover that you do not qualify for the standard mileage rate, or you prefer to claim a deduction for actual expenses, it’s important that you have detailed records of all of your vehicle’s expenses throughout the year. Hang onto receipts and make notes of the following kinds of vehicle expenses:
- Oil changes
- Repairs and maintenance
If you drive a vehicle for both personal and business reasons, you will only be able to claim a percentage of your vehicle expenses. For example, if you drive your 15,000 miles in one year for business reasons, and 5,000 miles for personal reasons, you will only be able to claim 75% of your vehicle’s expenses that year. For this reason, it’s important that you continue to maintain accurate records of the number of miles you drive for business purposes.
We recommend keeping a spreadsheet with all of your vehicle expenses, as well as total miles driven, for easy totaling at the end of the year. However, no matter how detailed your records, you will also need to keep copies of all receipts in order to claim the expense as a deduction.
There are many IRS regulations that stipulate which expenses you can claim, as well as certain types of vehicles that may not qualify for this type of deduction. This is why it is vital that you work with an experienced CPA when filing business taxes in Provo. The CPAs at The Accounting Guys can also help you to determine which type of vehicle deduction will yield the most benefit on your tax return, so contact us to schedule an appointment today.