First of all, regardless of these methods I am going to teach you today, know that you CAN write off the business use of your vehicle on your taxes…
The IRS gives you two options for writing off your vehicle. You can choose to write off the actual mileage the car was used for business OR you can do what is called a “standard mileage deduction.
I will start with your standard mileage deduction, as it is the simplest…
Start by tracking your Business Miles
Every year, the IRS publishes a “mileage rate. Using the “mileage rate provided”, simply take you business miles and multiply them by the IRS mileage rate and that will give you the deduction you are allowed to claim for that vehicle.
Business Miles x IRS Mileage Rate = Standard Mileage Deduction
Now, lets talk about tracking your ACTUAL mileage… This one is a little more complicated…
I want to first make it very clear that with BOTH methods, you need a mileage log. This will protect you in case of an audit.
So, the actual mileage method is exactly that… You track the money that you spent on the vehicle. This includes…
- Oil Changes
- Interest expense
With this method, you will also need to compare the business miles with the total miles the vehicle was used.
Say I drove 10,000 miles and 9,000 of those miles were spent on business. That means I am able to deduct 90% of those expenses as a business expense.
There are all kinds of other little tips and tricks to help you basically end up writing off the total cost of your car within about a year. If you want more information, please feel free to contact me John@incitetax.com. I am always happy to talk and help answer your questions.
Don’t forget to watch this weeks tip video, where I go into more detail about both methods to deduct your work vehicle!
Check out our other videos for information on the Profit First system and other great tax tips for microgym owner.
You can order a copy here of my new book Profit First For Microgyms and begin establishing your HEALTHY cash flow system, TODAY!
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