Don't Drive By This Tax Deduction!

Mar 20 09:07 2009 TMWheelwright Print This Article

Have Your Business Reimburse You for Its Use of Your Personal Vehicle Your business can reimburse you for allowing it to use your car - even if you are the one using it in the business!

One of the most common tax deductions I see missed on a regular basis is the tax deduction for the business use of a personal vehicle.

When I meet with new clients and discuss this deduction,Guest Posting I hear all sorts of reasons as to why they haven't taken this deduction:

They didn't know they could They don't use their vehicle that much for business They were told that since it was a personal vehicle, it couldn't be deducted They thought it was a red flag for an audit

The truth is, anytime your business uses your personal vehicle, there's a tax deduction, whether the business use is 1% or 100%!

Have Your Business Reimburse You for Its Use of Your Personal Vehicle. Your business can reimburse you for allowing it to use your car - even if you are the one using it in the business!

When your business reimburses you, your business claims the reimbursement as a deduction, reducing the amount of business income that is taxable, which in turn reduces your overall taxes.

The tax savings get even better! The reimbursement you receive from your business is not taxable to you - it is tax free income!

Don't Miss These Vehicle Expenses To make this tax reduction strategy work, you'll want to track how many business miles versus total miles you put on your car in a year. Your business miles divided by your total miles is your percentage of business use. This is a very important percentage because it is the percentage of your vehicle expenses for which you can be reimbursed by your business.

Vehicle expenses include:

Maintenance, Tune-ups, Replacement parts, New tires, Gas, Oil, Washes, Car loan interest, Depreciation, Lease payments

These deductions add up, which can mean big tax savings!

How Much Can You Save in Taxes? Here are 3 easy steps to estimate your tax savings from legally deducting your vehicle expenses for business.

Step #1: Determine your percentage business use of the vehicle by using the calculation in the above section.

Example:

Business miles = 6,000

Total miles (including business, personal and all other miles) = 10,000

Business percentage use = 6,000 ÷ 10,000 = 60%

Step #2: Calculate your total annual vehicle expenses, using the above list as a guide. Then, multiply the total by the percentage business use from Step #1. This is your deductible amount.

Example:

Total annual vehicle expenses = $15,000

Multiply total annual vehicle expenses of $15,000 by business percentage use of 60% to determine deductible amount.

Deductible amount = $15,000 x 60% = $9,000

Step #3: Multiply your deductible amount by your marginal tax rate. The result is your estimated tax savings from deducting your vehicle!

Example:

Deductible amount = $9,000

Marginal tax rate = 30%

Estimated tax savings = 30% x $9,000 = $2,700...every year!

You can usually find your marginal tax rate in a summary report provided with most tax returns prepared by a CPA or tax software.

STOP! Don't Drive By This Deduction. The vehicle deduction is one of my favorite tax deductions because it has the ability to turn expenses you already have into tax deductions. This creates a permanent tax deduction which eliminates tax!

Source: Free Guest Posting Articles from ArticlesFactory.com

  Article "tagged" as:
  Categories:

About Article Author

TMWheelwright
TMWheelwright

The truth is, anytime your business uses your personal vehicle, there's a tax deduction, whether the business use is 1% or 100%! http://www.provisionwealth.com

View More Articles