Tax time is right around the corner, and small business owners around the country are scrambling to get ready to submit their returns. If you’ve been down this road before, chances are you paid your estimated taxes quarterly and kept detailed records of every expense, to make sure you could either maximize the return you will receive or minimize your tax bill. It takes a huge commitment to successfully run a small business, especially in this recession economy, and you deserve every savings opportunity you can possibly drum up. One of the largest business expenses for most entrepreneurs is their automobile. Here are a few tips for how to write off auto expenses for your business.
First of all, you have to understand proper record keeping. Unlike with other expenses, this goes far beyond hanging on to your receipts and organizing them by month or by category. If you hope to claim auto expenses, get yourself a small notebook you can keep in the car. Divide it into columns for each category. Every time you use your vehicle for business you should note down the date, the starting mileage reading on your odometer, the ending mileage reading, your starting point and ending point and the reason for your trip. This is basically your tax bible for writing off car business expenses.
The best method of preparation is to go through this book on a monthly basis. Pull out the mileage breakdowns, and note down how much you drove for business during that month. Then put together another total, which represents all of the mileage you drove, whether it was for work or for personal reasons. You’ll want these numbers when you come up with your yearly totals.
Basically, you will approach the expenses in one of two ways. The simplest method is to claim your business expenses based on the mileage you drove over the course of the year. The IRS posts a cost per mile each year, and it does fluctuate. Make sure you get the most recent rate, and then tally up every mile you’ve driven for business. That dollar amount is what you can claim for the entirety of your auto expenses. It includes all wear and tear and other expenses specific to operating the vehicle.
The other way to claim expenses is through declaring every business expense as line items on your tax return. You will still need the mileage, but you will use it to come up with the percentage of total mileage that went to operating your business. The ideal would be if you use your vehicle for business at least 50% of the time, but whatever the percentage is, that is the percentage of every auto expense you can claim. You can include anything you have receipts or statements for, from repairs to lease payments to the insurance policy you purchased on www.CheapCarInsurance.net. Just remember that you cannot claim the whole, only that percentage. The expenses that you could claim separately and in their entirety are things like tolls, parking fees and gas expenses when they are strictly for work.