Jennifer Dunn for Outright.com writes: Of the many tax breaks for businesses, we’ve found that the two most overlooked are the home office and auto expenses deductions. We totally get it – taking both of these deductions can be tricky. But the tax savings make them worth the effort.
When you first look into how to calculate automobile-related expenses, it might seem like a lot of hassle over a little bit of money. After all, if you’re counting mileage, a few trips back and forth to the post office only add up to a few dollars in tax savings. But today we urge you to take a second look…
Automobile-Related Deductions Add Up Quickly
The thing about the automobile expenses deduction is it IS a bit of work. You have to keep track of your trips throughout the year, as to take the deduction means you have to have evidence. This could involve saving gas receipts or counting every single mile you’ve driven for business related events.
But, again, it can be worth it. This is because the travel deduction will add up much more quickly than you imagine. Yes, even if you don’t travel across the country regularly to run your business.
Let’s say on an average week you drove to the post office three times to deliver packages. The post office is three miles away which puts you at 18 miles a week. Over the course of a year, that’s 936 miles! The IRS’s mileage deduction for 2013 was 56.5 cents. That’s over $500 in tax savings! That doesn’t even take into consideration trips to buy supplies, business lunches and meetings, and yes, conferences. So you can see why it’s worth it to at least take a look.
The Two Ways to Track Travel Expenses
We did mention that automobile-related expenses can be tricky, but we’ll go over the two ways to track them: “Standard Mileage” and “Actual Expense.”
The Standard Mileage Deduction
Standard is the deduction you normally associate with travel – counting mileage in a car, truck, van, or other vehicle that you own or rent. The standard deduction changes every year, but for 2013 it was 56.6 cents per mile.
However, medical or moving miles are counted at 23.5 cents per mile, and a mile for charitable organizations is 14 cents. Also, parking fees and tolls can be counted towards your total if you go this route.
The Actual Expense Deduction
Actual Expense works a little differently. Since you more than likely use your car for both personal and business purposes, you can only report a portion of these for your business. If you do have a car you specifically use for business, though, you can deduct 100%.
Here is a list of actual expenses that count for Actual Expenses:
- Deprecation
- Lease Payments
- Registration Fees
- Licenses
- Gas
- Insurance
- Repairs
- Oil Changes
- Garage Rentals
- Tires Purchased/Repaired
- Tolls
- Parking Fees
No matter which direction you go, though, the important thing is to keep as much evidence as possible to prove that you indeed used your car for business.
Check out this post for more about tracking mileage with GoDaddy Online Bookkeeping and the great rule of thumb accountants recommend for deciding which tracking type is right for you.
Last but not least, we always recommend that you consult a good accountant if you have questions about taking particular tax deductions.
0 comments:
Post a Comment