Question for the Money Doctors
Question submitted on Dec 27, 2012.
QuestionHow much is saved by buying a business vehicle before the end of the year. I understand that there is currently a better depreciation schedule.
Deduction vehicle expenses for business purposes can be a complex topic. Your deduction will be limited to the business usage portion of the vehicle. Careful record keeping is essential to be able to claim these expenses. You have a choice of using the Standard Milege rate which is 55.5 cents per mile for 2012 and 56.5 cents per mile for 2013 or the actual expenses method. Actual expenses include gas, oil, service, repairs, and depreciation. Special rules apply of you lease a vehicle. There is not enough room here to go into detail about how this all works.
However, there are some very helpful publications which includes flowcharts and worksheets provided by the IRS. Please go to www.irs.gov and in the search box, input the following publications:
Publication 535 - Business Expenses
Publication 334 - Tax Guide for Small Business
Publication 463 - Travel, Entertainment, Gift, and Car Expenses.
Please be aware that vehicle expenses are a typical item that is audited by the IRS so it is important to be aware of the rules and keep good records.
Since these rules are some complex, you should consult a qualified tax advisor to evaluate which method makes the most sense for you. This will also help you evaluate the after tax cost of your vehicle acquisition.
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