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  1. The IRS offers two ways of calculating the cost of using your vehicle in your business: 1. The Actual Expenses method OR 2. Standard Mileage method. Each method has its advantages and disadvantages, and they often produce vastly different results. 

    1.    The Actual Expenses method:
    As the name suggests, the Actual Expenses method requires you to add up all the money actually spent in the operation of your vehicle. You then multiply this figure by the percentage of the vehicle’s business use.
    For example, if half the miles you drive are for business and half are for personal use, you will multiply your total vehicle expenses by 50% to arrive at the business portion (e.g. $9,500 total expenses x .50 business use = $4,750 business expenses).
    Some of the costs you can include in your Actual Expenses are:
    Lease payments
    Auto insurance
    Maintenance (such as oil changes, brake pad replacements, tire rotations)
    New tire purchases
    Title, licensing, and registration fees (not deductible in all states)
    Vehicle depreciation (use a depreciation table to calculate the amount, and then deduct only the portion that applies to the business use of your vehicle)

    2.    The Standard Mileage method:
    The Standard Mileage method is a much simpler way of calculating the business use of your car. It does not require you to track individual purchases and save receipts. Instead, you simply keep track of your mileage for the tax year. 
    As with other tax deductions, you must determine the percentage of your mileage that applies to your business.
    If half the miles you drive are for business and half are for personal use, you will multiply your total mileage by 50% to arrive at the business portion (e.g. 10,000 miles x .50 business use = 5,000 business miles).
    Once you have determined your business mileage for the year, simply multiply that figure by the Standard Mileage rate.
    For tax year 2021, the Standard Mileage rate is 56 cents/mile. Carrying through the example above:
    5,000 business miles x $0.56 standard rate = $2,800 Standard Mileage deduction.



    o Standard Mileage vs. Actual Expenses: Getting the Biggest Tax Deduction - TurboTax Tax Tips & Videos (intuit.com)

    UTC 2022-01-14 04:34 PM 0 Comments

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