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.

Swiss Taxation Issues You Should be Aware of as the Owner of an LLC

Enjoying healthy tax breaks are one of the most prominent reasons for forming an LLC, a Limited Liability Company. The tax breaks afforded to LLCs differ around the world so before you start to explore your tax break options, in fact, before you even start the process of forming a limited liability company, you should familiarise yourself with the tax breaks that are afforded to LLCs in the country in which your company is registered.

tax

This means information that specifically affects your company in the country in which your LLC is registered and not general information, for as many businesspeople have found out, there are often unexpected surprises awaiting those that form an LLC without having a comprehensive understanding of the benefits of doing so.

Forming a Swiss LLC

Many businesspeople have found it advantageous to form a limited liability in Switzerland, and not only because of its reputation for being rather tax friendly to companies, but also because of its transparency – according to the 2012 Corruption Perception Index Switzerland ranks favourably as the sixth least corrupt country – and the fact that Switzerland has signed a wealth of double taxation treaties with regional economic powerhouses, and many up and coming economies, around the world.

Taxation in Switzerland

Like most countries, the taxation system in Switzerland is that of a classical corporate tax system, however, unlike in many other countries Swiss tax is levied on three levels: the national level (federal taxes), the cantonal level (cantonal taxes) and the communal level (communal taxes). This isn’t as complex as it might initially sound, though it’s advisable to have a consultancy firm on hand like co-handels zentrum to assist with matters concerning taxation on all levels, national, cantonal and communal.

Swiss taxes are among the lowest throughout Europe, which has, as mentioned above, made it appealing to foreign businesspeople looking to take advantage of low taxation rates – corporate taxes are 16-25% and individual rates 5-20%.  However, it’s important to note that the largest portion of tax is levied at the canton and communal (municipal) levels, and that each canton has its own tax laws which are voted upon by the population in each canton.

Furthermore, companies are taxed in the canton in which they’re based, or where it carries out its business activities, which means that any businessperson looking to form a company in Switzerland should take note of this and register their company accordingly. This is yet another reason to work with a consultancy firm with strong experience in taxation for companies of all varieties including limited liability companies.

Corporate tax services in Switzerland

If you are planning to form a limited liability company in Switzerland, or have already formed one, you are advised to consult with a consultancy firm that offers a broad range of taxation services, moreover, as many consultancy firms are able to arrange company formations and provide taxation assistance, these are the consultancy firms that will prove most advantageous to have by your side.

One of the most common tax related services that consultancy firms provide is that of double tax treaties and treaty abuse and although Switzerland has entered into double taxation treaties with over 60 countries, including most of Western Europe, the need for assistance with this aspect of Swiss taxation is common amongst foreigners who have formed limited liability companies in Switzerland.

Seeing that limited liability companies are not taxed but rather the owners of the LLC, many foreign businesspeople who form limited liability companies in Switzerland require assistance with individual taxation issues and that’s another reason to have a consultancy firm on hand to assist with issues pertaining to taxation.

Moreover, although federal tax is calculated by income, cantonal and communal tax are calculated by the individual’s residence, their assets as well as their income, which can make ascertaining how much tax should be paid difficult, so once again foreign businesspeople are advised to seek assistance from a consultancy firm to assist with any issues pertaining to Swiss taxation.

Take note of these important taxation considerations regarding limited liability company formation in Switzerland and definitely don’t overlook the importance of forming a company and dealing with taxation issues with the assistance of a consultancy firm.

Author Bio:

Zoe George is a freelance writer for CO-Handelszentrum GmbH on www.co-handelszentrum.com, a company in Switzerland that is dedicated to helping clients in dealing with concerns relating to IT, process optimisation, commercial strategy development and more.