How To Keep Track Of Your Car Expenses for Tax Purposes

When it comes to car expenses and tax deductions, there are two main methods you can use: the standard mileage method or the actual expenses method. Let’s take a closer look at each of them.

The standard mileage method allows you to deduct a certain amount per mile driven for business purposes. This is the simplest way to track your

  1. Standard mileage. The standard mileage rate is the IRS’s basic cost per mile. Simply multiply your company miles traveled during the year by the agency’s regular charge to determine your tax burden. You may also deduct tolls, parking expenses, and business interest on your auto loan under this method.
  2. Actual expenses. You may deduct the actual cost of running your automobile for business using the actual expense strategy. Gas, tolls, insurance, parking, repairs, maintenance, registration and license fees, loan interest, and depreciation are all examples of these expenses.

Regardless of the method you use, you’ll need records to support your deduction. You’ll have to keep track of your mileage under both methods, although the actual cost method needs more paperwork than the typical mileage method.

The IRS’s mileage rate, which is a fixed rate, is supposed to represent costs of operating your vehicle. Before choosing the simpler approach, though, consider the impact on your taxes. The cost of employing the convenience of the mileage rate might be deductions lost. If you drive frequently or long distances for business, or if your automobile expenses are high,

You should consider how long you’ll keep the car and how much money you’ll save under each approach before deciding which one to use. There are a lot of exceptions and restrictions when it comes to company vehicle deductions. Give us a call to ensure that you utilize the technique that is appropriate for you, as well as to see whether there are any other

DISCLAIMER: The information contained in this article is for general informational purposes only and should not be construed as legal advice. You should not act or refrain from acting based on any information contained herein without seeking the advice of an attorney.