The age of a car may impact whether or not you utilize the Standard Mileage Deduction or some other method for expensing your business vehicle usage. An older car may realize greater tax benefit from the Standard Mileage Deduction if one or more of the following apply:
1. Its value has diminished and depreciation would be a minimal part of the expenses to be deducted,
2. The vehicle is paid for and no interest is being applied against it that could be deducted,
3. Cost of repairs and maintenance is minimal.
To determine if the Standard Mileage Rate is more beneficial, simply multiply the number of business miles by the current IRS allowance and compare that amount to the cost of operation multiplied by the percent of business usage.
There is one major factor to consider - you may not switch back and forth between expensing methods. Once you select the expensing method, you must continue to determine your deductions using that formula until disposition of the vehicle.
For more information on requisites and exceptions visit the IRS explanation page .
Saturday, May 24, 2008
Standard Mileage Deduction Advantages
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2 comments:
I selected standard deduction in your poll. I never buy new cars and I find that my total actual expenses are less than what I receive as a deduction with the mileage rate.
As the annonymous poster indicated, used cars may offer a greater savings by using the standard mileage deduction. This strategy is easier to impliment for the self-employed and small business owners who have more flexibility in selecting the vehicles used for business purposes.
Businesses that utilize fleet vehicles, on-the-other-hand, may not have much choice when it comes to deploying new automobiles. For reasons of safety, insurance and financability, they may need to deploy only newer models.
But if you have the ability to choose an early model car that is also reliable, this strategy can help improve your company's bottom line profitability.
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