The Basics on Actual Auto Expenses Deductions
Audio version available here:
Length: approx. 1 min. 20 sec.
Welcome to the XQ CPA Tax Day Checklist, a series sharing tax tips every day leading up to the April 15th tax filing deadline. Today we are continuing our discussion on automobile deductions for business use. We previously covered the first of the two methods for auto deductions: the standard deduction.
The second deduction method is called the actual expenses method. The actual expenses method takes into account all expenses for your vehicle such as gas, car insurance, lease payments, car washes, maintenance, repairs, licenses, and registrations.
In order to substantiate this deduction with the IRS, you will need to keep track of all your vehicle-related expenses and receipts. Documentation is key. If you are unable to prove to the IRS that you are entitled to this deduction, you may be liable for noncompliance.
How should you choose between the Standard Method and the Actual Method? The best way to determine which auto deduction method is best for you is to weigh the number of miles you drive, the value of your vehicle, and how willing you are to keep up with all your vehicle’s expenses.
Want more tax tips? XQ CPA has all the latest and greatest tax tips and business news for 2023 tax filing. Tune in tomorrow to learn about home office deductions.
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