Business auto deductions​​

• NOTE: Requires substantiated proof of business, personal, commuting and total miles used each year.

• You are allowed either Standard mileage or Actual vehicle expenses. Whichever is greater.

  • Standard mileage:

    • Deduct cents per mile for business miles driven. Choose standard mileage in the first year to have option of standard mileage or expenses in future years.

  • Actual vehicle expenses:

    •  Deduct business portion of gasoline, insurance, tags, inspection, plates, repairs, maintenance, and depreciation costs. 

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• Other business auto deductions:

  • Parking and toll road fees

  • Business portion of vehicle interest expense.

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• Depreciation versus Section 179 deduction:

  • Section 179 expense:

    • Allows electing for an expense deduction up to $500,000 (as of 2012) for qualified property instead of depreciation.

    • Depreciation-an expense deduction is allowed ratable over the statutory life of assets

      • Note: We do NOT recommend taking accelerated depreciation for business vehicles due to recapture rules.

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For Home Offices: (You must qualify)

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• Telephone expense

  • Office in home-

    • The first telephone line into your home is not tax deductible. Other business lines are deductible.

    • Long distance business calls are deductible.

    • Cellular phone usage should allocate portion for personal use.

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• Payroll

  • Employee versus contract laborer

    • Internal Revenue Service has increased auditing

    • 20 important questions to answer. See IRS Form SS-8.

  • ​Employee reporting requirements can be found on IRS forms 941, 940 & TEC form C-3, 1099s. Most forms due quarterly, some annually.

  • Payroll tax requirements. Less than $50,000 monthly liability, taxes are due the 15th day of following month at local bank.

  • S corporations Must Have salary expense for officers.

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Overlooked Deductions

• Business gifts of $75 or less per recipient

• Cleaning and laundering services when traveling

• Depreciation of home computers

• Employee educational expenses

• Passport fee for a business trip

• Self-employment tax (1/2 of tax deductible)

• Trade or business tools with a life of 1 year or less

• Uniform and work clothes not suitable as ordinary apparel

• Expenses indirectly related to job such as refreshments for employees

• Health insurance premiums for the self-employed (100%)

• Retirement contributions that need to be made before filing return.