BUSINESS USE OF YOUR CAR
IRS Publication 463, “Travel, Entertainment, Gift and Car Expenses” is available if you click http://search.irs.gov/web/query.html?col=allirs&charset=utf-8&qp=&qs=-Wct%3A%22Internal+Revenue+Manual%22&amp;qc=&qm=0&rf=0&oq=&qt=463&search.x=18&search.y=11
If you use your car in your business, you can deduct either:
Actual Expense or a standard mileage rate.
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SWITCHING FROM ONE METHOD TO THE OTHER:
If you use ACTUAL expense the FIRST year, you CANNOT switch back and forth in future years.
If you use the standard rate the FIRST year it is used in business you CAN switch back and forth in future years.
PRORATION OF BUSINESS AND PART NON-BUSINESS USE OF CAR
If you use your car for business and personal use, you must prorate the expenses based on actual mileage. If you drive 50,000 miles but 20,000 are for personal use, then you can only take 60% of the expenses
WHAT CAN BE USED IF YOU DEDUCT ACTUAL EXPENSE:
You can deduct depreciation or lease payments, gas and oil, tires, repairs, tune-ups, insurance and registration in proportion to your business Expense.
IRS publication 946 “How to Depreciate Property” is available if you click the link below:
STANDARD MILEAGE DEDUCTION:
You may be able to use the standard mileage rate deduction For 2006, it's 44.5 ½ per mile. In 2007 it will be 48½ cents per mile).
DEDUCTING CAR EXPENSE AS AN EMPLOYEE BUSINESS EXPENSE –FORM 2106
You take the deduction, as an employee, on Form 2106, “Employee Business Expenses,” and reduce the deduction by any amount reimbursed by your employer.
CAR EXPENSE DEDUCTION AS A SELF-EMPLOYED BUSINESS EXPENSE-Schedule C
If you are self-employed, you can deduct the business part of interest on your car loan, state and local personal property tax on the car, parking fees, and tolls, but no depreciation, if you claim the standard mileage rate. If you take actual expense, you would take all of the above but you would substitute depreciation and actual expenses for the standard mileage rate in calculating your deducion.
This information is not intended to be advice to the recipient.In compliance with Treasury Department Circular 230, unless stated to the contrary, any Federal Tax advice contained in this Blog was not intended or written to be used and cannot be used for the purposes of avoiding penalties.
Tuesday, December 19, 2006
BUSINESS USE OF YOUR CAR