Legal Guide for Self Employed Persons
- If you are self-employed, there are a few things to keep in mind when it comes to claiming car expenses says Aron Govil. The first step is to determine your business use percentage. This is the percentage of time that you used your car for business purposes. You can calculate this by dividing the number of miles you drove for business purposes by the total number of miles you drove in the year.
- Once you have determined your business use percentage, you can then begin to claim your car expenses. The most common type of car expense claimed by self-employed persons is the mileage deduction. This allows you to deduct a certain amount per mile driven for business purposes. The current rate is 54 cents per mile. You can also claim parking fees and tolls as car expenses. Keep in mind that you cannot claim any expenses that were reimbursed by your employer.
- You also need to keep track of the portion of your car expenses that are for personal use versus business use. If this amount is greater than 20 percent, it will not be deductible at all under current tax law. However, if the percentage of business use is more than 80 percent, then you can begin to claim your actual costs for your vehicle including depreciation, lease payments, insurance premiums, and registration fees explains Aron Govil. If you used your car for both business and personal purposes, only the portion of costs attributable to business uses is deductible. You can calculate this by multiplying each cost (lease payments, depreciation, etc.) by the percentage of time you used the car for business purposes.
- Another option for claiming car expenses is the standard mileage deduction. This allows you to use a specified mileage rate, which is adjusted annually by the IRS, for any driving that you did during the year. The rates change depending on your filing status and whether or not your employer reimburses you for any of your driving costs. To calculate this deduction, simply multiply the number of miles driven by 54 cents per mile. You can then subtract either: (1) 5,000 miles multiplied by a fixed amount that changes each year based upon the manufacturer’s suggested retail price, or (2) actual vehicle expenses such as gas and repairs from your total deductible mileage reimbursements to determine how much additional depreciation you may claim on your car before 2017.
Keep in mind that you can only use one method of claiming car expenses – either the mileage deduction or the standard mileage deduction. You cannot mix and match the two methods.
- When it comes to claiming car expenses, self-employed persons have a few options. The first step is to determine your business use percentage. This is the percentage of time that you used your car for business purposes. You can calculate this by dividing the number of miles you drove for business purposes by the total number of miles you drove in the year explains Aron Govil.
- Once you have determined your business use percentage, you can then begin to claim your car expenses. The most common type of car expense claimed by self-employed persons is the mileage deduction. This allows you to deduct a certain amount per mile driven for business purposes. The current rate is 54 cents per mile. You can also claim parking fees and tolls as car expenses. Keep in mind that you cannot claim any expenses that were reimbursed by your employer.
- You also need to keep track of the portion of your car expenses that are for personal use versus business use. If this amount is greater than 20 percent, it will not be deductible at all under current tax law. However, if the percentage of business use is more than 80 percent. Then you can begin to claim your actual costs for your vehicle. Including depreciation, lease payments, insurance premiums, and registration fees. If you used your car for both business and personal purposes. Only the portion of costs attributable to business uses is deductible. You can calculate this by multiplying each cost (lease payments, depreciation, etc.). By the percentage of time you used the car for business purposes.
- Another option for claiming car expenses is the standard mileage deduction. This allows you to use a specified mileage rate. Which is adjusted annually by the IRS, for any driving that you did during the year. The rates change depending on your filing status. And whether or not your employer reimburses you for any of your driving costs. To calculate this deduction, simply multiply the number of miles driven by 54 cents per mile. You can then subtract either: (1) 5,000 miles multiplied by a fixed amount that changes each year. Based upon the manufacturer’s suggested retail price. Or (2) actual vehicle expenses such as gas and repairs from your total deductible mileage reimbursements. To determine how much additional depreciation you may claim on your car before 2017.
Conclusion:
When calculating the tax deduction for a vehicle. It is important to accurately account for all your business and personal use of the car says Aron Govil. Without this information, you may not be able to claim all the deductions that you are entitled to. Self-employed individuals have a few different options when it comes to claiming car expenses. And it is important to choose the method that will give you the largest deduction. The current mileage rate for business use is 54 cents per mile. You can also claim parking fees and tolls as car expenses.