| Using your personal vehicle for business use requires | | | | 12,500 and you drove 7,500 of those miles for |
| vigilant documentation which begins with the New | | | | business purposes, your vehicle deduction prorate |
| Year. Keeping your documentation correct will save | | | | factor will be 7,500 / 12,500 or 0.60. This means that |
| you a lot of money and aggravation when dealing with | | | | 60% of all vehicle costs are tax deductible as a |
| the IRS. This article is a call to everyone who uses | | | | business expense. |
| their personal vehicle for business, to maintain your tax | | | | Determining which method will yield a higher tax |
| deduction documentation correctly by writing down | | | | deduction is not a simple exercise. This depends on |
| your vehicle odometer reading on January 1st. This | | | | many variables including the type of vehicle you own, |
| entry alone will be contributory in figuring your total | | | | your driving conditions, your driving habits, your |
| vehicle mileage for the year. Remember that your total | | | | insurance premium, etc. The IRS standard rate is |
| vehicle mileage is a required element of proper | | | | typically not the best method for you financially, but it |
| deduction evidence for submission to the IRS. | | | | does grant you the benefit of reduced documentation. |
| The necessity of the total annual vehicle miles is not | | | | A study done in 1997 by the Victoria Transport Policy |
| apparent if you elect the Standard Mileage Rate for | | | | Institute reveals that the cost of operating a vehicle |
| your vehicle deduction. The computation to determine | | | | can be as high as $1.25 per mile for urban driving. That |
| your vehicle deduction using this method does not | | | | $1.25 was in 1997 when gasoline was only around $1 |
| need the total miles accumulated for the year. Your | | | | per gallon. |
| deduction is a simple multiplication of your business / | | | | You should never fabricate or estimate any of your |
| charity / medical mileage by the IRS rate. However, if | | | | vehicle mileage entries. You don't ever want to be in |
| you use form 2106, Section-A requires the total annual | | | | the position of defending your deduction on the |
| vehicle mileage. Similarly, the simplified form 2106-EZ | | | | allegation of fraud. The IRS has been known to use |
| implies this required information in Part II. On the | | | | any vehicle service repair receipts, or possibly state |
| simplified form you are required to populate | | | | inspection reports (which have the odometer value |
| 'businesses, 'commuting', and 'other' miles. The | | | | and date) as a means to invalidate your |
| implication here is that if you completely documented | | | | documentation in an effort to disallow your deduction. |
| your business and commuting miles, the 'other' miles | | | | Proper documentation is a requirement for anyone |
| would be your total annual miles minus your business | | | | who uses their personal vehicle for business use. You |
| miles, minus your commuting miles. | | | | should now, at the very least, go out and purchase a |
| Conversely, if you elect to use the 'Actual' vehicle | | | | mileage log book from you local office supply store. |
| deduction method, your total vehicle mileage is a | | | | On the first page you will record your odometer |
| requisite part of your income tax deduction. This | | | | reading for January 1st or you should visit my website |
| method of calculating your vehicle expenses uses the | | | | and download a free PDF file to use for your vehicle |
| total annual vehicle mileage to prorate the entire cost | | | | log. You can start off the New Year on the right foot |
| of operating your vehicle as a ratio of business vehicle | | | | by recording you vehicle odometer now and make a |
| miles divided by your total vehicle miles for the year. | | | | resolution to keep your vehicle mileage log book up to |
| For example: if your total mileage for the year was | | | | date. |