TaxTips about Vehicle Expenses

Category: Business Strategies
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Posted on: 07/03/2008
Posted by: T-ReX
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Is it Better to Use Actual Expenses or the Standard Rate?

You can deduct vehicle costs on your taxes using actual vehicle expenses or the standard mileage rate.

Actual Expenses:	Standard Rate:
-Collect Receipts -Write-Off Expenses that are Deductible	-Log Mileage -Deduct using Standard Mileage rate

The STANDARD RATE may be more beneficial for individuals who have a lot of mileage and low vehicle costs. Using the ACTUAL EXPENSE method is only better when your vehicle costs are very high.

The standard mileage rate is used to figure the deductible cost of a vehicle that is owned or leased. For Tax Year 2008, the IRS is allowing taxpayers to deduct 50.5 cents per mile driven for the first 6 months of 2008, and 58.5 cents per mile driven for the final six months.

FOR EXAMPLE
A person who spent $10,000 on gas but only traveled 10,000 business miles would want to use the Actual Expense Method because it can yield a larger deduction than the Standard Mileage Rate.
Actual Expense Method	Standard Mileage Rate
$10K deduction for gas expense	$5.85K standard deduction (10K * 58.5 Cents)

Use the Method that is most Advantageous!!!

A person who spent $5,000 on gas and traveled 20,000 business miles might benefit more from the standard mileage deduction.

Actual Expense Method

Standard Mileage Rate

$5K deduction for gas expense

$11.7K standard deduction (20K * 58.5 Cents)

Pay attention to specific rules about listed property, depreciation limits (which change often), and switching accounting methods. Whether using the standard mileage or actual expense deduction, be sure to track mileage and expenses related to your rental activity. You usually won't know which method to use until the end of the tax year, so it's best to just keep a good record of all vehicle activities.

To learn how to take control of your Real Estate and Taxes, check out RealTaxTips at TReXGlobal.com.

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Current Grade: A-
Category: Business Strategies

TaxTips about Vehicle Expenses

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