Sunday, December 15, 2013

The Tax Break in Your Garage / Auto - Car Mileage Is Deductible Under Certain Conditions

Tom Herman for the Wall St. Journal writes: If you use your car for business purposes, you may be eligible for a valuable tax deduction.

You might also be eligible if you use your car—or some other type of vehicle, such as a van or truck—for medical purposes, moving or to help charitable organizations. Just be sure to keep good records. It also might help to be aware of a choice you have in calculating your deduction.
The easy way is to use the Internal Revenue Service's optional standard mileage rate. The other option: Deduct your actual expenses. Here are a few details.
A few days ago, the IRS announced the optional standard mileage rates for next year:
56 cents a mile for business miles driven, down from 56.5 cents a mile this year.
23.5 cents a mile for medical or moving purposes, down from 24 cents a mile this year.
14 cents a mile driven "in service of charitable organizations."
The IRS said the standard mileage rate for business is "based on an annual study of the fixed and variable costs of operating an automobile."
The rate for medical and moving purposes is "based on the variable costs" of operating a car. The rate for helping charities is set by statute.
If you conclude these rates are too stingy, consider deducting your actual expenses, such as oil, gas, tolls and many other items. (See IRS Publication 17 for more information.) If you use your car for both business and personal purposes, divide your expenses accordingly.
The IRS offers an example: You are a contractor and drive your car 20,000 miles during the year, but 8,000 miles are personal use. You can claim only 60% of the costs (12,000 is 60% of 20,000) of operating your car as a business expense.
Warning: This can be a surprisingly complex area, including just figuring out the basic question of who is eligible. You may need to consult a trusty tax professional. Most employees and self-employed workers should look at "Figure 26-B: When are Transportation Expenses Deductible?" in IRS Publication 17.
"Daily transportation expenses you incur while traveling from home to one or more regular places of business are generally nondeductible commuting expenses," the IRS says.
But there are "many exceptions for deducting transportation expenses, like whether your work location is temporary (inside or outside the metropolitan area), traveling for [the] same trade or business, or if you have a home office."


Post a Comment