Page 38 - Small Business Taxes

16:29 - 11-Jan-2023
Page 32 of 53
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The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.
drive to your clients to deliver your completed work. You If you qualify to use both methods, figure your de-
can deduct the cost of the round-trip transportation be- TIP duction both ways to see which gives you a larger
tween your home and your clients. deduction.
Actual car expenses include the costs of the following
Methods for Deducting Car and Truck items.
Expenses
Depreciation Lease payments Registration
For local transportation or overnight travel by car or truck, Garage rent Licenses Repairs
you can generally use one of the following methods to fig- Gas Oil Tires
ure your expenses. Insurance Parking fees Tolls
• Standard mileage rate. If you use your vehicle for both business and personal
• Actual expenses. purposes, you must divide your expenses between busi-
ness and personal use. You can divide your expenses
Standard mileage rate. You may be able to use the based on the miles driven for each purpose.
standard mileage rate to figure the deductible costs of op- Example. You are the sole proprietor of a flower shop.
erating your car, van, pickup, or panel truck for business You drove your van 20,000 miles during the year. 16,000
purposes. The business standard mileage rate from Janu- miles were for delivering flowers to customers and 4,000
ary 1, 2022, to June 30, 2022, is 58.5 cents per mile. The miles were for personal use (including commuting miles).
business standard mileage rate from July 1, 2022, to De- You can claim only 80% (16,000 ÷ 20,000) of the cost of
cember 31, 2022, is 62.5 cents per mile. operating your van as a business expense.

If you choose to use the standard mileage rate for
! a year, you cannot deduct your actual expenses More information. For more information about the rules
CAUTION for that year except for business-related parking for claiming car and truck expenses, see Pub. 463.
fees and tolls.
Reimbursing Your Employees for
Choosing the standard mileage rate. If you want to Expenses
use the standard mileage rate for a car or truck you own,
you must choose to use it in the first year the car is availa- You can generally deduct the amount you reimburse your
ble for use in your business. In later years, you can employees for car and truck expenses. The reimburse-
choose to use either the standard mileage rate or actual ment you deduct and the manner in which you deduct it
expenses. depend in part on whether you reimburse the expenses
If you choose to use the standard mileage rate for a car under an accountable plan or a nonaccountable plan. For
you lease, you must use it for the entire lease period (in- details, see chapter 11 of Pub. 535. That chapter explains
cluding renewals). accountable and nonaccountable plans and tells you
Standard mileage rate not allowed. You cannot use whether to report the reimbursement on your employee's
the standard mileage rate if you: Form W-2.
1. Operate five or more cars at the same time;
2. Claimed a depreciation deduction using any method Depreciation
other than straight line, for example, ACRS or
MACRS; If property you acquire to use in your business is expected
to last more than 1 year, you generally cannot deduct the
3. Claimed a section 179 deduction on the car; entire cost as a business expense in the year you acquire
4. Claimed the special depreciation allowance on the it. You must spread the cost over more than 1 tax year
car; and deduct part of it each year on Schedule C. This
method of deducting the cost of business property is
5. Claimed actual car expenses for a car you leased; or called depreciation.
6. Are a rural mail carrier who received a qualified reim- The following is a brief overview. You will find more in-
bursement. formation about depreciation in Pub. 946.
Parking fees and tolls. In addition to using the stand- What property can be depreciated? You can depreci-
ard mileage rate, you can deduct any business-related ate property if it meets all the following requirements.
parking fees and tolls. (Parking fees you pay to park your
car at your place of work are nondeductible commuting • It must be property you own.
expenses.) • It must be used in business or held to produce in-
Actual expenses. If you do not choose to use the stand- come. You can never depreciate inventory (explained
in chapter 2) because it is not held for use in your
ard mileage rate, you may be able to deduct your actual business.
car or truck expenses.

Page 32 Chapter 8 Business Expenses