How to Maximize Your Auto Deductions
Having decided to purchase a vehicle for your business, you now need to choose which deduction method to maximize tax savings. Will you use the Standard Mileage method? Or the Actual Expenses method?
The Standard Mileage method involves adhering to the IRS approved mileage rate. 2023’s rate is 65.5 cents per mile. Meaning that for every mile you log and claim, you will receive 65.5 cents of deduction. However, there are rules you need to follow if you use the Standard Mileage method for your business vehicle.
You must not utilize five or more business vehicles
You cannot claim depreciation on the car with any method other than straight-line
You cannot claim an S179 deduction
You cannot claim a special depreciation deduction
You cannot claim actual expenses
The Actual Expenses method involves tracking all your actual costs including gasoline, oil, repairs, insurance, registration fees, licenses, depreciation, and lease payments based on business usage percentage.
Remember, parking fees and tolls attributable to business purposes are always deductible, regardless of which method you use! For a more detailed explanation, please check out our video today.