Doing your taxes? Don't overlook the many ways your vehicle can help reduce your tax bill. Depending on your situation, properly claiming and deducting vehicle usage can be very helpful during tax time. How?
If you itemize deductions, be sure to include the taxes paid to register or renew your vehicles. There are two caveats, though. First, only taxes are deductible on the Schedule A; don't include fees paid. Second, not all taxes are deductible. Look for taxes based on the value of the property - rather than the weight - and deduct only those. If you're unsure of the amount, check with the local agency that issued the registration.
Costs of using your vehicle for business purposes are deductible business expenses. If the vehicle is only used for the business, you may choose to either claim actual expenses or use the standard mileage rate published by the IRS annually. For 2015, this business mileage rate is 57.5 cents per mile. If the car (or truck) is used for both personal and business purposes, determine the miles used for business reasons and deduct those only. When calculating business miles, keep in mind that the IRS does not allow mileage used in commuting to or from your home to your regular place of business.
Other Deductible Mileage
Don't have a business? Don't worry, there are still several other reasons to deduct mileage on your tax return. Miles driven for charitable activities (such as volunteering for a qualified organization) are allowable at 14 cents per mile (in 2015). Also deductible are the costs of moving a significant distance for work-related reasons (in 2015, the rate is 23 cents) as well as mileage driven for medical purposes (at the same rate).
How to Prove Expenses
Be sure to keep records in case the IRS ever audits your return. If using the actual expenses method, this means keeping receipts for maintenance and repairs, insurance, fuel, fees and licenses, and other related costs of maintaining the vehicle. The best method for all claimed usage is to prove all deductible expenses is to keep a daily mileage log that shows the date, reason for the trip, mileage, and starting/ending points.
While keeping track of mileage and expenses for your car or truck throughout the year might take some extra time, it can prove to be a valuable investment when it comes time to pay your tax bill. Talk to your local tax consultant, such as Cowan Digiacomo & Associates, for more information.