To maximize automotive deductions, it’s important to remember to keep organized records of the transportation expenses you incur. The IRS states that you need adequate records and documentary evidence.
It could seem daunting depending on how you manage your finances. Automating the process with tools like Veryfi make it extremely easy to track.
There are two ways you can expense auto. Standard mileage rate or actual car expenses. Both mitigate costs incurred from driving or operating a vehicle for business purposes.
The per-mile rate for 2017 is 53.5 cents per business mile driven. Multiply the number of business miles driven by 53.5 cents to determine how much you can deduct. The standard mileage rate limits what you can expense, but will allow you to include parking and tolls.
Comparably, Standard Mileage rate is easier to track than actual car expenses. However, via the actual car expense method you may potentially see larger deductions.
With actual car expenses you can include:
If potentially larger savings are available to you. And you know the tools necessary to track your spending. Actual car expenses may seem like the best choice. Before you decide, it’s important to note that if you choose the actual car expenses method, you’re subject to this form of filing until the commencement of your leasing period (if you’re leasing your vehicle). Whereas with the standard mileage rate, you have the opportunity to change your filing method after the first year.
Your auto expenses and the method you choose to write them off can have a significant impact on your business. Consider both methodologies and the current status of your business to decide which works best for you.