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)
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Need Some Deductions for 2012?
Don't overlook these!
Updated for 2012
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What is the Actual Expense Method?
Under the actual expense method you may deduct business-related operating expenses plus depreciation.
Switching methods:
If you start out using the actual expense method for a particular vehicle the first year it's placed in service for business use, you may not switch to the mileage allowance method for that particular vehicle in any other year.
Deductible Car Expenses
- Fuel
- Garage rent
- Insurance
- Interest on your car loan
- Self-employed persons can deduct interest on a car loan. Multiply the annual interest by your business-use percentage to figure the deductible amount.
- The nonbusiness-related portion of the interest is a nondeductible personal expense.
- Employees are out of luck. Car loan interest is not deductible even if the vehicle is used for the job.
- Depreciation for vehicles:
- See IRS Publication 4562 Instructions, page 16 for annual depreciation limits for passenger passenger cars (Table 3) and light trucks, vans, and SUVs weight-rated 6,000 pounds or less Table 4).
- Bonus depreciation for new vehicles placed in service
in 2012 is
$8,000.
- You add the $8,000 to the regular annual depreciation limits for
passenger cars ($3,160 plus $8,000 = $11,160 annual ceiling) and
light trucks, vans, and SUVs 6,000 pounds or less ($3,360 plus
$8,000 = $11,360 annual depreciation ceiling).
- SUVs and trucks weight-rated over 6,000 pounds are not subject to annual depreciation ceilings, however, first-year expensing for the vehicle may be limited to $25,000 rather than the regular expensing limit, which is $139,000. The vehcile must be used more than 50% for busness to qualify for first-year expensing.
- You add the $8,000 to the regular annual depreciation limits for
passenger cars ($3,160 plus $8,000 = $11,160 annual ceiling) and
light trucks, vans, and SUVs 6,000 pounds or less ($3,360 plus
$8,000 = $11,360 annual depreciation ceiling).
- Also see Depreciating Your Vehicle- Six Things to Know about Depreciating Your Vehicle
- Lease payments:
- If in 2012 you lease a vehicle for a lease term of 30 days or more, you may have to indirectly report as income an amount based on an IRS table. This rule applies if you deduct the business portion of your lease payents plus other operating costs; it does not apply if you claim the standard mileage allowance. The way this works is, rather than actually including an amount in income, instead, you simply reduce the lease charges by a so-called "inclusion" amount shown in the lease table in IRS Publication 463 page 24.
- Oil
- Parking fees
- Registration fees
- Personal property tax for vehicles:
- Some states charge a registration fee based on the value of the vehicle rather than its weight, model, year, or horsepower.
- The part of the fee related to the value of the vehicle is a personal property tax.
- If you use your vehicle less than 100% for business, deduct the business portion of the entire registration fee as a business expense. Deduct the non-business portion of the personal property tax on Schedule A if you itemize your deductions (the personal property tax line).
- States that assess a personal property tax on vehicles: AL, AZ, AR, CA, CO, GA, IN, IO, KY, LA, MI, MN, MS, MO, MT, NE, NV, NH, SC, WA, WY
- Check with your state
- Personal property tax for vehicles:
- Repairs and maintenance
- Tires
- Tolls
Next:
Car Expenses: 100% Business Use of Vehicle Under the Actual Expenss Method
Related Links
- Turning Commuting Mileage into Deductible Business Expense
- Phaseout of Hybrid Credit
- Alternative Minimum Tax (AMT)
- 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?
- Nontaxable Exchange (trade-in old vehicle)
- Taxable Sale of Car
- Computing Basis of New Vehicle When Trading In Old Vehicle
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