Business Vehicle Tax Deduction

Drive your business forward with our expert guide on vehicle tax deductions, designed to navigate the complexities of tax savings on your business vehicle—unlock the potential for significant financial advantages.

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Are you going to miss out on a big tax deduction this year? 

You will if you use your vehicle for business travel and don’t make mileage tracking and timely record-keeping part of your routine. In fact, depending on how much you use your vehicle in business, failure to track mileage and other expenses could mean you miss out on a tax deduction worth hundreds or even thousands of dollars.

Two Ways to Deduct Business Auto Expenses

When you use your personal vehicle in business you can claim a tax deduction in one of two ways. You can either take the business mileage deduction or deduct the actual costs of using your car. If you run any type of business requiring you to drive frequently, your mileage can add up to a big tax deduction.

For example, if you drive 7,500 miles in a year, and the standard mileage rate for the year is 62.5 cents, you’d be entitled to a deduction of $4,687.50 using the standard deduction rate. Depending on your expenses, you might get a higher deduction if you used the actual expense method instead. It’s worth recording the mileage and taking the deduction no matter the amount of miles you drive for business.

Although taking the deduction sounds like a no-brainer, many small businesses don’t claim the vehicle tax deduction or don’t take as large of a deduction as they’d be entitled to. The reason: They don’t have good records to prove the deduction. Fortunately, you can solve that problem by using ZenBusiness Money Pro to record and organize the records you need for the mileage deduction.

Record Keeping Requirements

Whether you use the standard mileage deduction or the actual expense method, you need to record your car mileage. The details to record include the date, business purpose, destination, and mileage for each time you drive the vehicle for business. If you plan to claim the actual expense deduction instead of the standard mileage deduction, you also will want to record your expense for gas, oil, lease payments, registration, insurance, garage rental, parking fees, depreciation and other costs of operating your car. 

For IRS purposes a “car” is an automobile, small van, or small truck made primarily for use on public streets and highways. It must weigh less than 6,000 pounds unloaded. It can’t be used to transport people for hire, or be an ambulance or hearse.

How to claim the deduction

If you’re using the standard mileage deduction, at the end of the year, you add up all the business miles driven and multiply that by the standard mileage rate for the year to claim your deduction. 

If you choose the actual expense method instead, you can deduct the percentage of your car expenses that equals the percentage of time you drove the car for business. Those expenses include gas, oil, repairs, tires, insurance, registration fees, licenses, and depreciation (or lease payments) attributable to the portion of the total miles driven that are business miles. To determine that percentage, divide the business miles you recorded by the total miles the car was driven for the year.

For instance, if you drive your car 12,000 miles for business and the total mileage put on the car is 20,000 for the year, the business mileage would be 60% (12,000/20000=0.60). If your actual car expenses for the year adds up to $6,400, you would be entitled to a deduction of $3,840 ($6,400 X 0.60).

No matter which method you use to claim the deduction, you must have accurate and timely records to prove the deduction.

Solution to Record keeping Frustrations

Keeping those records manually can be a pain. You might scrawl a note to yourself in a notebook you keep in your car or van. Or write down mileage on the back of an envelope. Then there are those receipts you stuff in your jeans pocket…and find a week later in unreadable condition at the bottom of your washing machine or dryer. Any of the mileage and expense notes that make it to your office may get shoved into a drawer or file folder until you “have the time to do something” with them. 

When tax time rolls around, you spend hours looking for and deciphering all the receipts, or give up in frustration.

Fortunately, ZenBusiness Money Pro can make recording and organizing all those car mileage and expense records easier. Instead of scribbling notes on the random pieces of paper, you can use the ZenBusiness Money Pro app to record your auto mileage and expenses while you are on the road. Then, come tax time, you can use the app to pull up the reports you need to claim all of the vehicle tax deduction that you are entitled to.

The app’s Mileage Tracking function lets you enter to and from addresses, information about the customer you are traveling to, and other pertinent details. If you are just traveling to one customer and then returning to your business, there’s a round-trip button you can use to save time and complete the record. In most cases, the Mileage Tracking feature will track the distance and time automatically but for some addresses, the customer may need to manually add the Time and Distance.

A time-saving feature of the app lets you add and save vehicles, create and save favorite locations, and create custom categories. If you have more than one business or more than one vehicle, the Mileage Tracking feature can record which business and/or vehicle the mileage should be assigned to. 

The Mileage Tracking feature produces 4 different handy reports: Business Mileage by Business, Business Mileage by Client, Mileage Detail List (spreadsheet) and Personal Mileage by Category. 

If you are using the actual expense method to claim your car expense deduction, you can pull up the rest of your vehicle expenses from the main ZenBusiness Money Pro application. Here’s an example of all the expense and other reports you can quickly pull up from ZenBusiness Money:

The Bottom Line

Claiming all your  car expense tax deductions could result in substantial savings if you have the records you need to claim those deductions. ZenBusiness Money Pro makes it easy to record, organize and retrieve those records.

Disclaimer: The content on this page is for information purposes only and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.

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Written by Team ZenBusiness

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