Business Deductions
- Amortization
- Business Losses and Net Operating Losses
- Car and Truck Expenses
- Day-Care Services
- Depreciating Business Property
- Depreciating Your Car
- Domestic Production Activities Deduction
- Health Insurance Deduction
- Home Office Deduction
- Meal and Entertainment Expenses
- Organizational Costs and Start-up Costs
- Qualified Plan Awards
- Schedule C Expenses
- Section 197 Intangibles
- Should You Sell or Trade in Your Car?
- Start-up Costs
- Travel Expenses
More Tax Topics
- Business Structures
- Hiring Workers
- Retirement
- Top Tax Myths
- Per Diem Rates - IRS Publication 1542 Oct 2011 for Travel Within the Continental U.S (for employers who pay a per diem allowance to employees)
Quick Links
Hot Topics
Need Some Deductions for 2011?
Don't overlook these!
Updated for 2011
Small Business Deductions: Car and Truck Expenses
<< Previous
Changing From Personal Use to Business Use During the Year
If you used your vehicle only for personal use, say from January 1, thru May 31st, then, on June 1st you also started using it for business purposes, you may not know the personal use miles you had traveled from January 1st thru May 31st.
Question?
How do you figure out your business use percentage for the entire year when you don't know your mileage for your personal use for part of the year?
A simple calculation will do the trick. This is best shown by example.
Example:
Vehicle changed to business use.
- Jack uses his Honda Accord for personal use from January 1, thru December 31st (12 months).
- This is Jack's only car.
- Jack started a business in April.
- He starts using his vehicle for business April 1st.
- Business miles total 20,000:
- April 1st thru December 31st.
- Number of months used for business were 9:
- April 1st thru December 31st.
- Total miles April 1st through December 31st were 25,000:
- Includes business and personal miles.
- Jack doesn't know what his personal miles were during the first three months of the year (January 1st and March 31st).
- Jack's business use percentage is 60%, calculated as follows:
Business miles traveled April 1st thru December 31st DIVIDED BY total miles traveled April 1st thru December 31st MULTIPLIED BY number of months vehicle used for business DIVIDED BY 12.
Here are the numbers: (20,000/25,000) X (9/12)= 60%
Here's how the business use percentage is applied:
Example:
60% business use:
- Jack is self-employed
- He operates a sole proprietorship
- Jack uses the actual expense method to deduct his vehicle expenses.
- Jack's annual operating expenses for his vehicle were $4,000
- The maximum annual depreciation deduction for passenger cars placed in service in 2011 is $3,060
- Jack paid $500 interest on his car loan
- The vehicle's registration fee was $250.
- Jack lives in a, Arizona, one of the states that assesses a personal property tax on vehicles as part of the registration fee.
- Bonus depreciation for 2011: $8,000
- Jack's car was purchased new during 2011 and placed in service in 2011 and therefore, qualifies for bonus depreciation.
On Schedule C, line 9, Jack enters $9,486 as his vehicle deduction, figured as follows:
- Operating expenses: $2,400 (60% x $4,000)
- Depreciation: $1,836 ($60% x $3,060)
- Interest: $300 (60% x $500)
- Registration fee: $150 (60% x $250)
- The remaining 40% is deducted as an itemized deduction on Schedule A line 7.
- Bonus Depreciation: $4,800 (60% x $8,000 maximum allowed for new vehicles 6,000 pounds of less)
Next:
Car Expenses: Personal Property Tax Included in Vehicle Registration Fee
Related Links
- Turning Commuting Mileage into Deductible Business Expense
- Sales Tax
- Audit Proofing Your Car Deduction
- Tracking Business Miles
- Estimates of Car and Truck Expenses
- Mileage Sampling
- Electric Cars
- Annual Depreciation Limits for Electric Cars
- Should You Sell or Trade in Your Vehicle?
- Alternative Motor Vehicles or Plug-in Electric Vehicle Conversions
Copyright © 2008-2012 Larry Villano. All rights reserved.