Standard Mileage Deduction Advantages

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 .

Tax Credits for Hybrid Vehicles

If you or your business is looking for a tax break, then purchasing a hybrid vehicle could provide a credit on your 2008 IRS bill.

You can find information on the available tax credits for different models available from the manufacturers that currently sell hybrid vehicles at the Government Fuel Mileage Site. However, you need to be sure to check on the current sales figures for specific models because the tax credits begin to decrease after 60,000 units have been sold by the manufacturer. The tax credits actually drop to nothing over the next several months after that 60,000 benchmark is reached.

Once the tax credit is decreased or eliminated you will need to evaluate whether the higher purchase price and maintenance costs will save you money as opposed to a conventional vehicle. For example, our analysis of the total cost of ownership for a Toyota Prius versus a similarly equipped Ford Focus found that the Focus was less expensive to own over five years (excluding a tax credit).

This article gives an excellent review of the parameters to be considered when comparing the cost of a hybrid versus an all gasoline powered vehicle: quamut.com .

Also, be sure that if you lease a hybrid, you receive a discount commensurate with the available tax credit. The law is written so that the leasing company keeps the tax credit.

Again, that primary link is: Government Fuel Mileage Site.