How to Deduct the Business-Use of Your Car this Year

Many business owners and employees have to use a personal car for business purposes, and luckily it’s quite simple to claim these as business expenses following IRS regulations. In order to do so, it’s paramount that you keep accurate mileage and depreciation records. If you’rereading this thinking, “Oh no, I haven’t kept track of any of that this year.”You may have to wait until next year, but you have the ability to begin your record keeping soon, on January 1.

If you use your car for only business purposes, you can deduct its entire cost of operation, with some limitations discussed below. If you use your car for both business and personal purposes, you may only deduct the costs from business use.

In both cases, everything must be documented and strictly business-related. Keep reading for more on this to get started and be sure to consult with a tax advisor. Each individual business situation is unique and can be very complex, so expert advice will definitely help ensure you are following all the rules correctly.

Keep Detailed Records

The IRS is very detail-oriented, and they expect you to be the same. Keep a record of all your expenses and business miles that you want to write off with a vehicle expense log. You can pick one of these up at most office supply or stationery stores. There are also a number of apps available for mileage tracking that will do it for you.

Items to support the deductions you claim include receipts, canceled checks, and bills. For each business trip in the car,be sure to log the date, miles traveled, destination, and the purpose, such as whether it is for business, personal use, or your commute. It’s best to have a car with great MPG,because there is a standard deduction per mile. For more information on record keeping, you can check out Topic No. 305 from the IRS.

Standard Mileage Rate

The IRS allows self-employed individuals and employees to use a standard mileage rate when submitting business claims.To use the standard mileage rate for a car, you must own or lease the car and use it in within the first year of your business. It’s fairly simple to track your total mileage for the year–write down the odometer reading of the first day you start using the car for business purposes and on the day the year ends.

Business miles include anything actually driven for business, such as visiting a client, going to the bank, or meeting with an accountant or lawyer. All of this counts towards your deduction, as well as the cost of parking fees and tolls you pay for the business.

If you’re self-employed, you can deduct your car loan interest that’s related to the business use of the car. Commuting time and running personal errands is travel that is not considered business related. For the most up-to-date standard mileage rate, check out Publication 463 from the IRS.

Actual Vehicle Expenses

The other method for claiming your personal car for business use is called the actual expense method. To utilize this, you must determine the actual cost to own and operate the car for business purposes. This includes gas, oil, repairs, insurance, licenses, tires,registration fees, and lease payments from the total business miles driven.

Depreciation

Depreciation is the amount you can deduct overtime for standard wear and tear the vehicle obtains over time. If you use the standard mileage rate, you cannot deduct depreciation on the vehicle,unless you use your car for 50% or less for business reasons.

Typically, the Modified Accelerated Cost Recovery System is the only method that can be used if your car was placed in service after 1986, but be sure to check with a tax advisor. Depreciation can be a very complicated subject and you want to make sure you are doing it right for your business. For more information, refer to TopicNo. 704 from the IRS.

Ownership

Knowing the different types of car ownership will help you determine how to claim your car for business use the correct way. A sole proprietor or self-employed owner is one that is a single-member LLC and files a Schedule C their personal tax return. Like this,you can choose to use either the standard mileage rate or actual expense method.

An S Corporation/C Corporation requires a vehicle used for business to be owned by the corporation or by an employee. The method of claiming the deduction will depend on this ownership. If the vehicle is owned by an employee or a shareholder-employee, they can submit a request for reimbursement to their employer based on their documented business miles.

Typically, the corporation or business can then reimburse the employee based on the standard rate. It’s also generally easier for a business to allow an employee to use their own personal vehicle for work and submit an expense reimbursement request. This puts the responsibility of record-keeping on the employee, which saves time and money for the employer.

Sam Casteris is a small business owner and freelance writer operating out of Phoenix, AZ. You can find more of her work on Contently.

Is Your New Vehicle Driven to Safety?

newcarIf you’re in the market for a new vehicle, you’ll no doubt be asking lots of questions about the vehicle’s safety features. If not you should be.

Vehicle accidents account for more than 40,000 deaths in the U.S. annually. Many of those might have been avoided with the use of certain safety features. Thankfully, there’s a new trend for improving vehicle safety in this country. This trend can be picked up by consumers by asking questions, doing research online, and even using the social media and marketing tools that automakers are deploying more and more of these days.

Here are some of the latest and greatest features that can help protect you and your family:

State Farm’s Steer Clear Program

State Farm’s Steer Clear Program is designed for newer drivers under the age of 25, with three years or less driving experience. The program necessitates watching a DVD, fulfilling a driver’s trip log, and pledging safe driving for the future, as well as other requirements. In exchange for successful completion of the program, State Farm customers receive a discount on their insurance premiums.

It’s a simple way for younger drivers to brush up on their road and vehicle knowledge while enjoying a discount reward in the process.

Air Bag Warning Lights

Most parents know better than to seat a young child weighing less than 50 pounds in the front of the vehicle. But just in case, many front car passenger seats are now equipped with weight sensors that let drivers know when the passenger side air bag is deactivated due to insufficient weight.

If the light is on, then the child is too small and should be seated in the back.

Backing Up Cameras and Sensors

Unfortunately, it seems that every year smaller children are hurt or worse when a driver unwittingly backs into them. Drivers can’t see small children behind their bumper, and children playing in driveways or running loose in parking lots are susceptible to being unnoticed.

Backing up cameras and sensors give vision to drivers where they couldn’t see before. Anything in the way, including pets and bicycles causes the sensor to go off, alerting the driver to stop.

Automatic Headlights

In the past, drivers might have resisted turning on their headlights during dawn or dusk, due to the risk of forgetting to turn them back off again and returning to their vehicle to find a dead battery.

Since the advent of automatic headlights that turn off automatically after the engine has been shut down after a certain amount of time, drivers can feel comfortable leaving their headlights on all the time. This increases visibility and decreases the incidence of motor vehicle collisions.

Forward Collision Warning Systems

Some newer vehicles are equipped with forward collision warning systems that are designed to give an audible warning sound if your vehicle gets dangerously close to the vehicle in front of you, or even an inanimate object.

In these days of vehicle distraction, this system could make the difference between life and death.

As the following article looks at, when you’re ready to negotiate the price of a new car for you or a loved one, don’t forget to factor in any safety features the car may have.

The extra money to get those features is worth more than any amount you may save on another vehicle.

And along the way, do your research (including using marketing and social media tools) so that you’re knowledgeable about the vehicle you’re about to call your ride for years to come.

About the Autho: Kate Supino writes about best business practices, including programs and products put in place to protect the health and safety of consumers.