Page 34 - Tax Guide for Small Business

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The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.
You cannot deduct the costs of driving your car or Parking fees and tolls. In addition to using the stand-
! truck between your home and your main or regu- ard mileage rate, you can deduct any business-related
CAUTION lar workplace. These costs are personal commut- parking fees and tolls. (Parking fees you pay to park your
ing expenses. car at your place of work are nondeductible commuting
expenses.)
Office in the home. Your workplace can be your
home if you have an office in your home that qualifies as Actual expenses. If you do not choose to use the stand-
your principal place of business. For more information, ard mileage rate, you may be able to deduct your actual
see Business Use of Your Home, later. car or truck expenses.

Example. You are a graphics designer. You operate If you qualify to use both methods, figure your de-
your business out of your home. Your home qualifies as TIP duction both ways to see which gives you a larger
deduction.
your principal place of business. You occasionally have to
drive to your clients to deliver your completed work. You Actual car expenses include the costs of the following
can deduct the cost of the round-trip transportation be- items.
tween your home and your clients.
Depreciation Lease payments Registration
Methods for Deducting Garage rent Licenses Repairs
Car and Truck Expenses Gas Oil Tires
Insurance
Tolls
Parking fees
For local transportation or overnight travel by car or truck, If you use your vehicle for both business and personal
you generally can use one of the following methods to fig- purposes, you must divide your expenses between busi-
ure your expenses. ness and personal use. You can divide your expenses
• Standard mileage rate. based on the miles driven for each purpose.
• Actual expenses. Example. You are the sole proprietor of a flower shop.
You drove your van 20,000 miles during the year. 16,000
Standard mileage rate. You may be able to use the miles were for delivering flowers to customers and 4,000
standard mileage rate to figure the deductible costs of op- miles were for personal use (including commuting miles).
erating your car, van, pickup, or panel truck for business You can claim only 80% (16,000 ÷ 20,000) of the cost of
purposes. For 2019, the standard mileage rate is 58 cents operating your van as a business expense.
a mile.
If you choose to use the standard mileage rate for More information. For more information about the rules
for claiming car and truck expenses, see Pub. 463.
! a year, you cannot deduct your actual expenses
CAUTION for that year except for business-related parking Reimbursing Your Employees
fees and tolls.
for Expenses
Choosing the standard mileage rate. If you want to
use the standard mileage rate for a car or truck you own, You generally can deduct the amount you reimburse your
you must choose to use it in the first year the car is availa- employees for car and truck expenses. The reimburse-
ble for use in your business. In later years, you can ment you deduct and the manner in which you deduct it
choose to use either the standard mileage rate or actual depend in part on whether you reimburse the expenses
expenses. under an accountable plan or a nonaccountable plan. For
If you use the standard mileage rate for a car you lease, details, see chapter 11 in Pub. 535. That chapter explains
you must choose to use it for the entire lease period (in- accountable and nonaccountable plans and tells you
cluding renewals). whether to report the reimbursement on your employee's
Standard mileage rate not allowed. You cannot use Form W-2, Wage and Tax Statement.
the standard mileage rate if you:
1. Operate five or more cars at the same time; Depreciation
2. Claimed a depreciation deduction using any method If property you acquire to use in your business is expected
other than straight line, for example, ACRS or to last more than 1 year, you generally cannot deduct the
MACRS; entire cost as a business expense in the year you acquire

3. Claimed a section 179 deduction on the car; it. You must spread the cost over more than 1 tax year
4. Claimed the special depreciation allowance on the and deduct part of it each year on Schedule C. This
method of deducting the cost of business property is
car; called depreciation.
5. Claimed actual car expenses for a car you leased; or The following is a brief overview. You will find more in-
6. Are a rural mail carrier who received a qualified reim- formation about depreciation in Pub. 946.
bursement.

Page 32 Chapter 8 Business Expenses