Business owners can deduct vehicle costs two ways: multiply business miles by the IRS rate, or add up gas, insurance, depreciation, and other expenses then apply your business-use percentage. Either way, keep a mileage log for audits. Recent rules may let you write off the whole vehicle in one year.
In this tip today, I wanted to go over deducting your automobile, your car, your vehicle, however you want to say it, your truck. First, let me help you understand that regardless of these methods I'm going to teach you, you are able to write off the business use of your vehicles. The IRS gives you 2 ways in which you can write off the use of it. They either give you what they call actual method or standard mileage deduction. Let me start with the standard mileage deduction because it's the simplest. You track miles, your business miles, and then the IRS every single year publishes a mileage rate. You take your business miles, multiply it by the IRS rate, the standard mileage deduction as they call it, and that gives you your tax deduction for the business use of your vehicle. Now, the actual method is a little bit more complicated, and let me first say, even though we're using what did you actually spend on your automobile, You still need a mileage log. If you are audited and you decided to write off your actual expenses on the vehicle instead of the miles, the IRS is still going to expect a mileage log, and if you don't have it, they're going to disallow all those deductions. So the actual method is literally you track the money you spend on the vehicle, gas, Oil changes, tires, licensing, insurance. If you're buying the car, the interest expense on your loan. You also are able to depreciate the value of your vehicle. And so what— the reason we need the mileage log is because you actually have to also— you— Compare the business miles to your total miles. Let's say I drove 9,000 business miles, I drove 10,000 total miles. That's 90% business use, so I would get to deduct 90% of the actual money I spent on the vehicle. So those are the 2 methods. For the last few years, and looks like for at least the next 3 or 4 to 5 years. There are some very fun bonus depreciation methods, which basically is a fancy way to say you potentially could write off the total cost of your car in 1 year. Again, if there's things like that where you have further questions, please use us as a resource. Also, if you like the tip, please share it with others, and you can always subscribe as well. To our YouTube channel where we try to provide useful tips like this in very short digestible, you know, chunks of time. All right, have a good day.
