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Expenses related to use of your vehicle for business or other purposes, including gas, can be significant during the course of a year. The business-use portion of your driving, however, may provide you a substantial tax write off. Accurate record keeping is essential to validate these expenses, and ensure that you receive your maximum deduction and tax savings. However, the methods used to keep your records do not have to be complex, and can fit in with your normal day with minimal inconvenience.
Recording Business Use
At the beginning of each year, record the odometer reading of your vehicle. Keep track of the trips you take with the vehicle for business. Enter the beginning and ending mileage from your vehicle's odometer for the trip, and calculate the total mileage for the trip from these numbers. In addition, write down the destination of your trip. Record the reason for the trip. You do not have to be too detailed in the reasons, writing "sales call" or "post office to mail items" is sufficient. Also, record the date and time of your trip.
Your expense record does not have to be complicated to capture all of the important information. Make an entry for each car related expense, including gas. Enter the date that the expense occurred, who the expense was paid to and the total amount of the expense. For gas-related expenses, you can enter the amount of fuel in gallons that you purchased. If you deduct the actual expenses of your car from your taxable income, you need to record all of your expenses, not just expenses that you think are business related. Keep all of your receipts to validate these expenses.
You can use a variety of methods to record your vehicle expenses and business mileage. Use a consistent method that is easily available to you. A small notebook kept right in your vehicle is effective. Keep a pen with the notebook so that you will always have a way to write down trips and expenses as they occur. A smartphone or tablet computer with a spreadsheet app is also easy to use and convenient for quick entries. Consider using the notebook for immediate recording, and transferring the records to a computer later.
Your gas, and other vehicle expenses, are only available as a write off if you choose to use the actual expenses method when filing. In addition, vehicle expenses are only deductible proportionately according to your business use, compared with personal use of the vehicle, as determined by your usage logs. If you use your vehicle 30 percent of the time for business, and you have spent a total of $3,000 on gas for the year, $900 of the fuel costs are deductible.
Standard Mileage Rate
Instead of deducting your actual vehicle expenses, you may be able to deduct a fixed amount per mile of business. As of 2013, you can deduct 56.5 cents per business mile of vehicle use. This is a simpler calculation to make than actual expenses and may yield a larger deduction depending on your total vehicle expenses. If you use five or more cars in your business at the same time, are a rural mail carrier or depreciated your vehicle using anything other than straight-line depreciation, you must use the actual expenses method for calculating your deduction. Use the standard mileage rate for calculating deductible, non-business uses of your vehicle as well, such as use for charity, moving or medical treatment. These types of use do not use the business mileage rate, but have their own deductible rates.
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