5 Tax Benefits you should claim if you OWN A VEHICLE
Tax Benefits of vehicle and driving are imperative for Americans to get to their workplaces.
You own a vehicle, then you must be aware of the tax deductions and write-offs you can do at the time of filing for tax returns.
When you own a car
If you are travelling more than 50 miles away for a job, then the miles travelled can be deducted. However, driving your car for any personal reasons, commuting to and from work, certain meagre tasks by employers like picking up mails on the way etc. are not eligible for any claims.
- If you are driving a car for any volunteer work, then definitely you can claim the gas & mileage for driving to and from the place along with the parking charges & other tolls.
- If you are driving a car for employers with commuter benefits program, then there are benefits available to you in the form of transit passes that include tokens, fare cards or vouchers for mass transit, Vanpooling, parking charges etc.
- If you are driving a car fora business like a food truck or a mobile travelling photo studio or a mobile car-wash etc. then you can claim expenses as well.
When you own SUVs or trucks
- If you are self-employed& you purchase an SUV or a truck, then the entire purchase price can be written-off during filing for tax returns.
- You can also apply the bonus depreciation deduction for the vehicle while paying taxes.
While discussing tax write-offs on auto expenses, there are two major methods to be listed down.
In this method, your total business mileage covered by the vehicle is multiplied with the Standard Mileage Rate (SMR) which is fixed by the IRS to obtain the deduction. Different rates are set by IRS for categories like vehicles for medical or other moving purposes, vehicles used for charity purposes etc.
Actual Expenses method
Here, we sum up the total cost spent in the operation of the vehicle and then multiply it with the percentage of business use of the vehicle. While we calculate the total operation cost of the vehicle, we can include gas expenses, Insurance expenses, Maintenance expenditure, Licensing, Registration fees, Vehicle depreciation value (i.e. the depreciation value applicable to the business use of a vehicle) etc.
However, both of these methods produce different results each year. So, it is generally advisable to follow the Mileage method in the first year of purchase of the vehicle and later on, you can calculate the tax deductions yielding from both the methods & chose the one with larger deductions.
Hence to summarize, the major 5 tax benefits you can claim if you are the owner of a vehicle are:-
- The entire vehicle’s purchase price can be written off while filing for tax return if you have bought a new SUV or truck by the end of 2017, specifically, the vehicle should be above 6000 pounds.
- The depreciation deduction for a new SUV or a truck depends on the amount of time it has been used for business purposes. Suppose, an SUV has been purchased for $80,000 and has been used 90% for business activities then the deduction will be around $74000.
- If a car has been bought by the end of the year 2017 & the registration fees have been paid by the last day of the year, then the registration fees are deductible. Also, the sales tax on the purchase is deductible if you are going to use the vehicle for business purposes.
- Having a home office is an additional advantage for entrepreneurs while calculating tax deductions. If you are using a vehicle for business & you have a home office, then the percentage for which vehicle is used for business is increased &a major part of the automobile expenses of the owner are deductible.
- If you have purchased a passenger car towards the last 3 months of 2017, and you are using it 90% for business purposes, then you can file for a deduction of up to $11,160 of the purchase price.