By Harvey Amwake, C.P.A.
You plot the fastest route to your client’s office with an on-board navigation system. You use a hands-free cell phone to leave last-minute instructions for your staff on the way to the meeting. Your computer, presentation materials, and an extra shirt are in the back seat. In short, your vehicle is your office on wheels.
It’s also a tax deduction.
Here’s what you need to know to reap the benefits.
Overview: You can deduct auto expenses when you own or lease a vehicle and use it for business. Deliveries to customers, traveling to business meetings, and trips to the office supply store qualify as business use. Commuting generally doesn’t, even if you discuss work on your phone while stuck in traffic.
The rules: You have two alternatives for calculating the deduction: actual costs or the standard mileage rate. If you choose standard mileage in the first year you use a vehicle you own for business, you can usually switch to actual costs in later years. Choosing standard mileage for a leased vehicle locks you in to that method for the term of the lease.
What’s deductible? Under the actual cost method, deductible costs include depreciation, maintenance, gasoline, taxes, insurance, parking fees, and interest expense.
The standard mileage rate for business use during 2013 is 56.5 cents per mile. In addition, you can deduct the business portion of parking fees, tolls, certain taxes, and, if you’re self-employed, interest on your vehicle loan.
How to benefit: Maintain a log of business and personal mileage and keep receipts. Having both lets you pick the method that generates the largest tax deduction.
Talk with your financial adviser or call us if you would like more information on taxes and business driving.
This article is for general information only and does not constitute financial advice. If you have any questions about financial matters, consult a professional tax adviser. Harvey Amwake, CPA, is a tax and small business consultant with the accounting firm of Harvey E. Amwake, PLLC., at 6232 N. 7th St., Suite 105. He can be reached at 602-753-0377 or by e-mail at Harvey@AmwakeCPA.com.