| Is your business missing out on valuable tax deductions | | | | groceries. What would have been "dead" mileage |
| you can take for the use of your personal vehicle for | | | | becomes a deductible business trip, as long as you've |
| business purposes?If you haven't done so already, you | | | | logged your business purpose in your mileage logbook. |
| should definitely beat a path to the door of your local | | | | In addition, for both 2005 and 2006, the IRS also |
| office supply store and pick up a notebook for logging | | | | encouraged Katrina-related charitable relief activities by |
| the mileage you drive to conduct business-and be sure | | | | granting higher rates for miles deductible and miles |
| to log the miles you drove to buy it! | | | | reimbursable driven for such activities. |
| Not taking the trouble to do this is like letting your | | | | Of course, the use of these mileage allowances can |
| pricey gasoline flow onto the pavement instead of into | | | | be rather complicated. For example, you cannot take |
| your tank. | | | | additional deductions for business use of an automobile |
| Even if you work at home most of the time, miles | | | | to which you have already applied the Modified |
| you've driven to purchase office supplies, buy stamps | | | | Accelerated Cost Recovery System (MACRS), after |
| or mail packages, and other errands for your business | | | | claiming a Section 179 deduction for that vehicle that |
| can translate into big tax deductions. With fuel costs | | | | your business purchased directly. |
| soaring, you are literally throwing money down the | | | | And if you're using a personal vehicle for your |
| drain if you are not keeping track of this mileage and | | | | business, don't forget to calculate the percentage of |
| taking the deductions for it to which you're entitled as a | | | | total miles for the year that you travel for business |
| business owner. And the first entry you need to make | | | | purposes. At the end of 2006, you'll note the year-end |
| is the beginning mileage on the odometer as of | | | | odometer reading in your mileage logbook and subtract |
| January. You'll also want to make sure that you keep | | | | from it the odometer reading that you recorded this |
| track of all your automobile expenses associated with | | | | month. Then you'll add up all miles driven for your |
| that personal vehicle that you're using for | | | | business that you have recorded and divide it by that |
| business.(See why in my article "Valuable Tax | | | | total mileage to calculate the percentage of total miles |
| Deductions for your Vehicle You Can't Afford to | | | | you used for your business. If it turns out that 30% of |
| Miss"). | | | | your total mileage on that personal vehicle was for |
| The dramatic surge in fuel costs has not been lost on | | | | business purposes, you can deduct 30% of *all* your |
| the IRS. Of course, gasoline prices began to edge up | | | | expenses for maintaining that vehicle: not only fuel, but |
| shortly after the beginning of the war in Iraq; but the | | | | all trips to the garage for routine maintenance or |
| devastation wrought by Hurricane Katrina prompted | | | | special repairs as part of your business expenses for |
| the IRS to offer a valuable money-saving solution for | | | | the year. |
| business owners. (If you live outside the U.S.A. you | | | | The devil is in the details, as always, of course. You will |
| should check your tax authority's website for similar | | | | want to consult your tax accountant on how best to |
| provisions.) | | | | apply the rules to your situation. If you prepare your |
| Last year,for 2005, the IRS increased the standard | | | | tax returns yourself, you can get the details directly |
| mileage rate for the use of a vehicle (car, van, or | | | | from the IRS website: Examine the fine print closely: |
| truck) by 3 cents a mile, to 40.5 cents a mile for all | | | | You'll find that there are limits on what percentage of |
| business miles driven. However, in the wake of Katrina, | | | | business use can be claimed for a personal vehicle, no |
| that rate was increased further to 48.5 cents a mile | | | | matter what your actual numbers might be; so if your |
| for the business miles driven in the months of | | | | actual business mileage is greater than 75 per cent of |
| September, October, November, and December, 2005. | | | | your total mileage, you might be better off purchasing |
| This increased mileage rate ended with the end of | | | | a separate vehicle dedicated to business use. If you've |
| 2005. The new mileage rate for 2006, effective | | | | taken the care to structure your business |
| January 1, is now 44.5 cents per business mile driven. | | | | correctly--using a corporation, limited liability company, |
| You can maximize this deduction if you're careful to | | | | or other stand alone entity--you and your business will |
| consolidate business and personal errands. For | | | | benefit from even greater deductions. |
| example, I wait until I need to go to the post office to | | | | (C) Copyright 2006 Azur Pacific Associates. All |
| ship a package for my business to stop to at the drug | | | | formats and media, known and unknown. All Rights |
| store and supermarket right next door to pick up | | | | Reserved. |