How to Deduct Business Car Expenses for Tax Purposes
Car expenses can be a significant business cost for most business and especially so for small businesses. However, when it comes to deducting allowable expenses for your business taxation, various factors come into play. The IRS has provided various guidelines that govern deductions for car-related business expenses. These guidelines are detailed below:
Business Use Only
The IRS allows for the car expense deductions applied to business use only. If you use your car for both personal engagements and business, you will need to assign the business expenses first before making deduction. Travel between your home and place of work is considered personal use and this mileage will not be deducted while claiming the automobile business expense. You can calculate what percentage of the car mileage is for personal use and use the percentage to establish the car expenses. This is one area that the IRS places keen scrutiny and therefore, you will need to be careful when allocating the car expenses.
Depreciation Expense
The major car expense that is allowable for tax purposes is the depreciation element. The IRS provides detailed guidelines as to how to depreciate the value of the car over time for purposes of taxes. The depreciation procedure depends on the weight and price of the car.
Huge Tax Break for Cars Over 6,000 pounds
For cars that weigh over 6,000 pounds, the IRS allows for full depreciation in the first year of purchase. You can therefore, deduct the whole purchase price of the car before paying taxes. If the deduction of the car costs generates a business loss, you can offset the loss against other incomes or carry the tax liability forward towards a tax refund. This is a huge tax break that is worth consideration for anyone seeking to purchase a car for business purposes. Most car manufacturers including General Motors, Ford, Toyota, Honda, Mercedes Benz, Jeep, and Nissan all have a vehicle weighing over 6,000 pounds that qualifies for this full depreciation tax break.
Depreciation for Other Cars
For cars that weigh below 6,000 pounds, the depreciation is done over several years. For the cars priced over $15,300.00, the depreciation allowed for 2010 is $11,060 irrespective of the price of the car. The cars are then allowed a further depreciation deduction for another 5 years until 2015. However, cars purchased for $30,625.00 and above will have higher allowable depreciation deduction for 2011 to 2015 as compared to cars that were priced between $15,300.00 and $30,625.00.
Other Allowable Business Car Expenses
Besides the depreciation expenses, the IRS also allows for the deduction of other car expenses such as car maintenance, insurance, gas, and any other expense that is for business purpose. A business has two options for reporting these other non-depreciation car expenses. The business can opt to deduct actual costs incurred or it can opt to deduct 51 cents for every mile covered. However, in practice, using the actual costs will come to higher car expenses and therefore, a larger deduction, except for more fuel-efficient vehicles such as hybrids. You can always calculate both options and see which one gives you more deductions.
Car Hire
For businesses that hire cars, the IRS allows for a deduction of the leasing price and the deduction of gas and all other car expenses. However, the personal-business use rule also applies for leasing and if the car is used for both business and personal purposes, you will need to subtract the personal-use costs before applying the business-use expense deduction.
Tags: business taxation, car expense, car mileage, depreciation expense, personal engagementsBusiness Car Insurance – Guidelines
There are a few differences between business auto insurance and private auto insurance even if it isn’t that noticeable when the same driver uses the vehicle for both personal and business purposes. If there’s just one driver, many auto insurance companies suggest the company owner to purchase a normal personal insurance for the car as opposed to a limited business auto insurance. But, on the other hand the special business car insurance may be useful because of a certain specialized coverage that can be provided in this case.
For instance, if you are the owner of a small logistics company that gives goods from a sender along with a receiver, the car that makes the delivery possible may be driven by different persons at different moments of time as well as, the package transported can be hazardous containing a fragile item or perhaps a chemical substance. As a result if a car crash occurs while transporting this type of package, having special business car insurance could save you a lot of trouble, since the content of those packages can have a negative effect on others as well as on the environment.
Tags: auto insurance companies, auto insurance company, business auto insurance, insurance guidelines, logistics companyRelated posts
Business Car Leasing Helps to Save Money
Business car leasing is one of the concepts which are loved by many people round the world. It is often seen that those people who are businessmen have to travel a lot. Sometimes they travel through air sometimes they travel through road. When they are travelling through road, they cannot travel in their own every time. One has to make several tours in a year, some tours can be within the country and some can be outside the country. Those who travel outside the country cannot travel on their own car. Thus these business car leasing companies can easily provide you with a car on rent at fixed rates. These rates are affordable and can get some of the best cars which run in the country where you are making a tour.
The concept of business car leasing companies is still not known in some countries. But there are some who know about business car leasing companies but cannot afford to take it on rent. It is not the issue with the price that they cannot afford, but actually it is the feasibility which they think that they can travel with the tour guides on buses and other transport vehicles. Many people do not know that these car leasing deals give an advantage to the people or the tourist as they can travel places and stop at a particular place as long as they wish to. But if one is travelling in a tour bus one has limited time to be see the place. Thus renting a car is a better option these days.
Tags: business car, car leasing companies, car leasing deals, car rental deals, leasing dealer