Hey there, tax enthusiasts! Today, we’re diving into the world of tax deductions, specifically answering that all important question: Can you deduct your car expenses, and if so, how on earth do you do it?
1. Actual Expenses vs. Miles:
The IRS, gives you not one but two paths to choose: actual expenses or the straightforward mileage deduction. It’s like choosing between a scenic route with twists and turns or a direct highway to tax savings.
Actual expenses cover a multitude of things—gas, new tires, windshield wipers (yes, even those), oil changes, car washes, insurance, vehicle registration, and if you’re currently using a car loan, the interest on that too. But hold on, it’s not all sunshine and rainbows.
For the savvy entrepreneurs who loathe the idea of logging every single expense you have, the IRS has a mileage deduction. Calculate the miles driven for business, multiply it by the IRS mileage rate (which changes every year but you can look it up), and voila! You’ve got yourself a deduction. It’s the tax version of “set it and forget it”—almost.
This is the method we recommend because either way you’ll have to track your miles, so might as well take the easier route.
2. The Business Use Percentage
Now, here’s some important information. If you opt for actual expenses, the IRS demands what is called the “business use percentage.” It’s a fancy term for figuring out the percentage of your vehicle used for business. How do you do this, you ask? Simple: Track your mileage. Business miles divided by total miles, and there you have it.
In either scenario, mileage tracking is non-negotiable. So, if you’re thinking of pulling a Houdini on the IRS, think again. They’ve got their eyes on those miles no matter what.
3. The Odometer Chronicles: Tracking Miles Made Easy
Now, before you get overwhelmed with visions of endless spreadsheets, fear not. We’ve got a lifesaver for you! You can just use a simple Excel template. All you need is to have the date and number of miles you drove that day.
Print it off, toss it in your car, and each day, jot down your miles. It’s a 10-second ritual that will save you from tax-related nightmares. There are also apps that can help you in this process. But either way you choose to do it, trust us, you have to do it.
Conclusion: IRS Sucks, but We’ve Got This
So, in the grand scheme of things, can you write off your car for tax purposes? Absolutely! Choose your tax adventure wisely, pay for vehicle expenses out of your business, and keep that mileage tracker on point. The IRS might suck, but armed with the right knowledge, you can turn tax season into a process that will be a lot easier than it could be.
If you want more information, here’s our weekly video that will go into more detail!
Remember, if the road gets too bumpy, Incite Tax is here to steer you in the right direction. Happy driving, tax heroes!