A is for AUTO EXPENSES

Business auto expenses… it’s an area of the tax law that can be confusing and lead to abuse.  Businesses have two methods available for determining the most beneficial expense.  The following will explain each approach.

For a business, a vehicle can be deducted in two ways; actual expense and mileage.  When using actual expense, the vehicle can be depreciated and maintenance, insurance, gas and other expenses can be deducted. When using the standard mileage rate to calculate the deduction, depreciation expense is  included, therefore separate depreciate expense would not be taken.  When you purchase a new vehicle we will calculate the deduction using both methods (assuming all information is provided) and the method that gives the higher deduction will be used.  You should keep a log for each company owned vehicle recording the mileage and expenses for each.  This can become tedious but it will be one of the first items requested by an IRS auditor

If your employees are allowed to use company owned vehicles on personal time, it is considered a taxable fringe benefit.  We collect certain data and use an IRS table to determine the taxable amount.  This allows the business to deduct one hundred percent of the auto expense.  The employee pays tax on the personal use of the vehicle.  The IRS table for this taxable fringe is so beneficial that this is often the best method for both employer and employee.  The most important pieces of information needed are the annual business and personal miles on the vehicle.

As always, see your tax preparer in considering your tax situation.

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