What can I write off on automobile expenses?

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Individuals 12 months 2 Answer 247 views 0

About Kazim Qasim, EA, CTC

Tax Obesity Surgeon Kazim has over thirty years of experience in the accounting and tax profession and focuses on a fun term he calls tax obesity. He was formerly the CFO of a multi million dollar security corporation prior to founding his tax practice in 2006. Kazim focuses on advanced tax reduction strategies that help clients reduce tax obesity and save thousands of dollars annually. It is all about smart tax planning strategy.

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  1. Kazim Qasim, EA, CTC

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    Car and truck expenses are easy to overlook. That’s because most taxpayers simply take a standard mileage allowance. But that allowance is the same for all vehicles, no matter how big they are, how much they cost, or how much gas they guzzle. We all know every car on the road costs a different amount per mile to drive.

    It might surprise you to see how much it really costs to operate your car. And in many cases, those costs are much higher than the IRS standard allowance! If you’re only taking the flat-amount standard deduction for a car that costs more than that to operate, then you’re throwing away savings by not utilizing the “actual expense” method. You should compare both methods to evaluate the savings.

    If you plan on acquiring a new vehicle, selling your current one instead of trading it to the dealer could lead to substantial tax deductions. Proper care should be taken to appraise a trade-in or the private sale of an existing vehicle, and to verify the book value or tax basis of the vehicle, to maximize tax savings.

    There could even be unused losses for traded-in vehicles from prior years. Businesses that have consistently traded in vehicles in the past could potentially be sitting on $10,000s in business deductions.

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    While everything Kasim said is true, lets keep it simple:

    KEEP RECORDS – both for actual expenses and actual BUSINESS
    mileage.   For many small companies, the mileage deduction is the largest item on their P&L.  If the IRS denies it, because of poor or no records, not only will you pay more taxes but SE tax as well.

    SO – make it easy!  While mileage or expense logs can be misplaced or not available while you’re driving, I’m betting your smart phone is ALWAYS with you.  There are many, mostly free apps that will do the job for you.  I used TripLog last year and switched to MileIQ this year.  If you have an Apple phone there may be other Apps available.  Look for one that will automatically track your movement in case you forget to start it.  And allows you to classify business and personal travel.

     

     

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