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Tax question: Is it better to claim depreciation or mileage for your car you use in your business? |
Tax question: Is it better to claim depreciation or mileage for your car you use in your business? That depends on the type of car, cost of operating it, mileage driven for work, and total mileage for the year. Generally, if you drive a lot of miles, you are better off with the mileage. If you have a used car, mileage normally works. If you have a larger truck (F-150, Expedition, Tahoe, etc.), you can often take increased depreciation in the first year, which is tax advantageous. Depends on the value of the car and the miles you can actually claim. Ask your accountant. Or when using a tax program, just answer the questions honestly, and I believe your answer will be clear at that point. I have leared through past experience that it is both easier and more beneficial to you, to claim mileage. It gets a lot more technical, involves more paperwork, and you don't get as much back if you choose to claim the depreciation instead. My past experiences You're probably better off going with the milage, but it depends on a few things. Do you own the business? if so, does the business own the car? Have you received any reimbursement for your mileage? Is the car used ONLY for business? (driving to and from work is not a deductable business expense) If you don't own the business, and you haven't been reimbursed at all for your travel and the car is used for personal use as well, then you are better off going with the mileage. If you own the business, use the mileage unless the car is in your company's name. If you've been reimbursed, you are not entitled to a deduction (mileage or otherwise). If the car is used for business AND personal use, in order to deduct depreciation, you would have to figure out the percentage of each and pro-rate EVERY expense related to the purchase, maintanence and fueling of the vehicle. (mileage is a LOT easier). If you decide to try to figure the actual cost of your vehicle expenses and pro-rate them, remember that the toupee that you get after you pull all your hair out is deductable on next year's taxes, as are the medications you have to take after you go insane. Also, depreciation and other expenses have to be substantiated, mileage does not. Mileage always turns out ahead of depreciation in dollar terms. It also depends on how much you drive each year. They have increased the mileage dedcutions since Sept 05 due to gas price hikes. my tax preparer |
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