One of the more common tax preparation questions is “How much can I write off for my automobile used for business purposes so that I may maximize my tax planning?”
The IRS announced (IRS Notice 2013-80) on Dec. 6 the optional standard mileage rates for use of a vehicle. Taxpayers can use the optional standard mileage rate (rather than actual vehicle expenses) to calculate the deductible costs of operating a vehicle.
For business use of a car, van, pickup truck, or panel truck, the 2014 rate will be 56 cents per mile. The portion of the business standard mileage rate that is treated as depreciation will be 22 cents per mile for 2014, down one cent from the 23 cent rate in effect in 2012 and 2013.
Driving for medical or moving purposes may be deducted at 23.5 cents per mile.
The rate for service to a charitable organization is unchanged, set by statute (Sec. 170(i)) at 14 cents a mile.
Regardless of whether taxpayers use the optional standard mileage rate or actual expensed, a contemporaneous mileage log book is required to be maintained by the taxpayer to claim vehicle expenses. If a contemporaneous log book is not maintained, the IRS has the right to disallow the tax deduction for vehicle use.
To substantiate the vehicle deduction, the log book needs to show the date the vehicle was used, the business purpose of the trip, and the business mileage. The taxpayer also needs to record the odometer reading at the beginning and end of the tax year so that the total mileage for the year is known. The taxpayer then totals all of the business mileage trips in the log book. The ratio of total business mileage to total mileage is then multiplied against actual vehicle expenses to obtain the deductible portion if actual expenses are used. If the optional standard mileage method is used, the total business mileage is multiplied by 56 cents to arrive at the vehicle deduction.
Note: Because everyone’s tax situation is different, we invite you to call 610-594-2601 today to make an appointment at our Exton PA CPA office to discuss your situation.
You can also schedule a consultation at Click Here. To learn more about various tax and business services, visit Tax Preparation Services and Small Business Accounting Services
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