IRS Updates Vehicle Tax Deductions For Missouri Accountants
Business owners can deduct expenses for the use of a car for business purposes, for their own driving and for employee driving. To qualify to deduct driving expenses, accountants must be able to prove that the trip was specifically for business purposes. Personal driving expenses, commuting expenses, and other non-business expenses are not allowable business driving expenses.
You must be driving for business purposes, medical purposes, charitable purposes or because you’re relocating. The amount of your deduction is based on the number of miles you’ve spent driving for any of these tax-deductible purposes.
The IRS allows two different ways to deduct expenses for business driving: actual expenses and a standard mileage deduction. Which expense deduction method you choose depends on your situation and on IRS requirements and limitations.
The IRS has updated their rules for using the standard mileage rates when calculating the deductible expenses of operating a vehicle for business, charitable, medical, or moving expense purposes as a result of the Tax Cuts and Jobs Act. They also updated the rules for tax preparers to substantiate the amount of an employee’s ordinary and necessary travel expenses reimbursed by an employer using the optional standard mileage rates.
Business purposes include driving from your place of employment to another work site, to meet with clients, or to go to a business meeting.
Driving from your home to your workplace doesn’t count as a business purpose. The IRS says this is commuting and that’s a personal expense. But if you maintain an office in your home, traveling from your home office to meet with a client or to conduct business is tax deductible.
The deduction for business use of a vehicle is taken on Schedule C if you’re self-employed, on Schedule F if you’re a farmer, or as an itemized deduction as part of your unreimbursed business expenses on Form 2106 if you’re an employee.
Medical purposes involve driving to obtain medical care for yourself or for your dependents. The drive must be “primarily for, and essential to, medical care,” according to the IRS. The deduction is taken on Schedule A as part of your itemized medical expenses.
You can deduct car expenses if you use your car when you’re providing services to a charitable organization. Driving to perform volunteer services for a church, charity or hospital would be deductible.
This deduction is taken on your Schedule A as part of your charitable donations.
The cost of driving your car to move to a new residence may be deductible as part of the moving expense deduction if you must relocate for work-related reasons and your new place of employment is at least 50 miles farther from your old home than the distance between your old home and your old job.
Keep Records of Mileage and Expenses
It’s a good idea to keep a mileage log in case you’re ever called upon to prove you’re eligible to deduct your vehicle expenses. Enter the date of each tax-deductible trip you make, showing how many miles you drove and for what purpose. You’ll also need to know the total number of miles you drove for the year and keep track of your repairs and maintenance expenses for the year.
Our Missouri accountants at Schultz, Wood & Rapp can help you determine whether it is more beneficial to use your actual vehicle expenses or the standard mileage rate to get the larger deduction. This can vary depending on how many miles you drive, the amount of depreciation you’re claiming, and all the other vehicle expense variables.