Vehicle deductions can be tricky, but never fear! Deductions are on our minds all the time here at OTB Tax. When we work with home-based business owners, it’s important that they understand and take advantage of these deductions in order to save as much money as possible when tax time rolls around.
So, let’s get to it. Here is another way to save at tax time when you own a home-based business – your vehicle!
Vehicle Deductions 101
Click here for my video: Vehicle Deductions.
There are two ways that people can take advantage of vehicle deductions: the Standard Mileage Rate and Actual Expenses.
Standard Mileage Rate
The Standard Mileage Rate used to be the way to go. Deductions for the miles you put on your car each year would earn you $0.545 per mile. And people were happy with that! Depending on how many business-related miles you put on your car in a year, you could save thousands of dollars.
But now, taking Actual Expenses as your deductions seems to bring an even better outcome. Start by keeping track of how many miles you drive for business purposes in a year. Divide that by the total mileage driven in a year. That
number will be the percentage you will use to claim deductions for the Actual Expenses on your vehicle.
Once you’ve calculated the business percentage for your car, you can write off that percentage of these day-to-day expenses: gas, oil,
repairs, supplies, car washes, and more!
More Relaxing, Less Taxing Deductions
When you think about purchasing a new vehicle, that doesn’t necessarily mean that it has to be the brand new car that you drive straight off the showroom floor. As long as it is new to you, that works!
As always, the team at OTB Tax is here to help you understand the 475 deductions that are available to you as a home-based business owner. If you have questions or concerns about your options, feel free to book a Tax Strategy Session here: Book Now.
Here’s to a more relaxing and less taxing life with your vehicle!