First, I just want to say that I am loving reading your Self-Employed Tax Solutions book! It is very informative.
Regarding auto deductions: For the first 5 months of this first year of being an Indie business woman I have not kept gas receipts. I've thrown them away after the credit card statements balanced because someone told me I will just be using the standard mileage method as my deduction. I also do not have a car payment.
If I purchase a new auto in the next few months would I be able to switch to the actual auto method for the rest of the year or am I stuck this year because I had not kept gas receipts.
Thank you, Maureen
Hello Maureen,
I'm pleased my book has been informative for you. Thanks for letting me know.
Here's some more info on auto expense:
** It is OK to estimate gas expense if you do not have all the receipts.
For instance, if you know that you get 30 miles per gallon, and your average cost for gas for the year was $3.00 per gallon, then you may divide your total miles by 30 and multiply that number by $3.00 to come up with your cost for gas.
Here's an example:
30,000 total miles per yr / 30 miles per gal = 1,000 gal Xs $3 per gallon = $3,000 for gas.]
** You do not have to be making payments on your car to have substantial auto deductions. If you bought your car for $25,000 several years ago, and on your first day of business use you could have sold your car for $5,000 you have a $5,000 vehicle that you are using for business. And depreciation for the business use of that car may be deducted on your tax return. And, as I'm sure you saw in the auto worksheet in my book you may also deduct repairs insurance, registration, etc.
** You may use one method to calculate auto expense for one car and another method for the other car, as long as both cars weren't used in the same business during the same time.
If anyone needs an explanation of auto expenses, just go to my website : How to Calculate Auto Expense and How to Keep a Record of Business Miles .
Best,
June
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