Top 10 Tax Deductions for Vehicle Business Owners

First, there are many, many more top tax deductions than just 10. In fact, many deductions are commonly missed.

In fact, a popular entertainer once said: “ I am proud to be paying taxes in the United States. The only thing is I could be just as proud for half of the money”.

I bet you feel like that entertainer. What is sad is that many business owners pay unnecessary taxes because they do not know where to get help or they are focused on the urgent instead of the important.

My vote for the number one tax deduction is the vehicle because you can get a tax deduction for something you have to have. Americans love their vehicles. That is why there are so many different kinds, sizes and colors. The reason that heavy trucks and SUVs were the number one popular vehicle for business owners was because of the great tax savings Uncle Sam offers!

If you would ask me how much can I deduct on my vehicle, there would be at least 20 different answers based on what your situation is! Here are a few options that only a professional tax CPA can help you with:

1. Cents per mile called the standard method

2. Actual method which includes deduction for business portion of depreciation, insurance, gasoline, repairs, car washes, etc.

3. There are many different kinds of depreciation methods that can be used depending on your situation. Straight line, MACRS, Bonus Depreciations, Section 179, etc.

4. You might lease a vehicle instead of owning the vehicle so instead of getting tax depreciation, you get auto lease expense.

5. If your business is on a cash basis versus what is called an accrual basis, your vehicle deductions will be different for the year!

6. Does it make a difference if your administrative office is out of your home or whether you have to drive 20 miles each day to work?

7. If you own the vehicle instead of your business, the amount of tax deductions will be different as well as IRA audit risk.

 

Only a CPA tax professional can help you through the tax maze!

A common question is this “Is it smarter for tax purpose to lease or buy a vehicle?” Most of the Phoenix CPA firms will answer “it depends”. It depends on whether you plan on keeping the car for over 5 years. It depends on the weight of the vehicle. Is the vehicle over 6000 pounds? It depends on if you need a vehicle that heavy. I know that my eye perception is poor so I am sure that if I had a huge vehicle, I would bump into other cars and would have trouble staying within the lines and backing out of my parking space. My insurance rates would skyrocket!

What if you are on a cash basis versus an accrual basis for your business and you prepay 5 months of vehicle lease payments for the next year? On a cash basis, you can deduct the business portion of these 5 months of lease payments. On an accrual basis you cannot because you can only deduct the business portion of lease payments for that relate to the current tax year.

Albert Einstein [on filing for tax returns] “This is too difficult for a mathematician. It takes a philosopher.”

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About Jeffrey Brooks

Jeffrey Brooks, CPA, CFP, MBA since 1976 has specialized in helping clients save significant taxes, help businesses increase their cash flow, revenues and profits while increasing their control and satisfaction. Jeff and his accounting firm sincerely cares about the happiness of his clients.

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JBrooks Wealth Advisors, PC.

Certified Public Accountant
Address: 4647 N 32nd Street, Suite B245
Phoenix, Arizona 85018
Phone: 602-292-2009
Email: jeff@jbrookswa.com