As a Maine-based small business owner, you may be wondering how much can be deducted on your tax return for vehicle expenses. There are two basic ways to figure this out:
- The first is the standard mileage method. This provides a basic deduction for mileage and provides built-in depreciation. For 2017, the mileage rate is 53.5 cents per business mile driven. Business owners cannot use the business standard mileage rate if they have used any other depreciation method, including a Section 179 deduction. This method is also unavailable to businesses who use their vehicles for hire, or for more than four vehicles simultaneously.
- The second is the actual expense method. This gives you a depreciation allowance for the cost of the vehicle, plus deductions for gasoline and oil, insurance, and repairs. Generally this will result in a larger overall deduction than the standard mileage method. The cost of the vehicle can be written off based on the percentage of business use.
It’s important to note that if you are using the actual expense method, you have to keep a log and record all of the details of business use, including time, place, mileage, and business purpose.
The IRS calculates the standard mileage rate for businesses based on an annual study of the costs of using and operating a vehicle.
This is the basic structure of business-related automobile write-offs, but there could be other limitations involved. Consult with Filler & Associates for information about the best ways to buy and operate a business car for tax purposes.