Sunday, February 17, 2008

More about Business Auto Expense

Maybe it’s because gas prices are rising that I received a lot of questions about auto expense. I hope my responses here and elsewhere on my blog to the many questions about auto expense will help all you indies who use your car for business.

June,
I am considering taking a sales position. It would be outside sales. I would use my own car. They said that I could use my car as a write off. How do I look at this? If I put on 10,000 miles a year how much is it costing me to operate my vehicle and what do I get to deduct off my taxes if I make 40,000 a year?
Dave from Champlin, Mn


Hello June,
My name is Cesar, I am from Fairfield Ca. and been self-employed for the last 5 years as full time structure draftsman who works for a structural engineering firm.

My question is I have my client who's office is in San Francisco downtown and I travel to that office sometimes 5 days a week, but try to work from home at least 2 days when no rushes or deadlines occur, also work during the weekend as well.

Can I write off lunches I buy for myself?

Can I write off mileages and gas receipts? or one or the other on gas and miles? Also can I write off car insurance on one of my cars?



Dear June:
Your book
Self-employed Tax Solutions has been an invaluable help.

Regarding auto mileage deductions, I make a bank deposit daily. I want to know if I can take a mile deduction for driving to the bank from my house on the way to work or if I should go to the bank on my way from work. I can do either I was just trying to do what ever would give me the biggest benefit.For 2008 I will have an in home office deduction thanks to reading your book. The room I lease at the Spa is too small for an office so I do all my calls, Bank deposit slips and paperwork at home.

Thanks for the Help Joyce San Antonio, TX


Kimberly from Columbus, OH
I’m having a problem trying to calculate my miles driven per day for the year to get more tax money can you please help me out?


You may deduct as a business expense the cost of going from one work location to another. It’s as simple as that.

If you don’t have a home office, then you may not deduct going from home to the bank or to your studio in town or to your client’s office. You may deduct the cost of going from the bank to your studio or to your client’s office.

Business auto expense can be figured in one of two ways.

The first, the standard mileage method, simply multiplies your total business miles by a per mile rate set by the government. The rate changes yearly . For 2007 the rate was 48.5 cents per mile. For 2008 the rate is 50.5 cents per mile.

The other, the actual expenses method, multiplies your total auto expenses by the percent of business use. If you put 20,000 miles on your car in 2007 and 5000 were for business use then your business portion is 25%.

Expenses for your car, include items such as:
· Gas & Oil
· Repairs & Maintenance
· Tires
· Insurance (Remember AAA or other road service coverage, too.)
· Registration & License
· Car wash
· Garage rental
· Loan interest
· Lease costs
Parking tickets, speeding tickets and fines are not deductible business expenses.

Added to the business portion of expenses is the amount for depreciation of the business portion of the cost of the auto.


A note to Cesar: Sorry, no lunch deductions. Take a look at my response
On-the-road Meal Deductions to Kevin earlier today. You may deduct meals only when traveling. Check out the expenses -- meals and entertainment (8) category for a fuller explanation.

Check out my book Self-employed Tax Solutions. It will simplify your tax and financial life, and save you money!

2 comments:

Dan Riffle said...

If I'm a part time Indie can I deduct the mileage going from one job to another--from my part-time home office to my full-time paycheck job?

Dan in WV

June Walker said...

Dan,

Business mileage is going from any business location or event to another business location or event. Whether from your home office to the post office or to a client's or to another job, all are business miles.

If included in that scenario is you commute from home to a W2 job then you must deduct that mileage.

Know what I mean by that? If not let me know.

-- June