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Business owners only benefit from tax deductions for business use of a vehicle by following certain procedures. This is an area that is often scrutinized by the IRS. Therefore, business owners are susceptible to having tax deductions disallowed by failing to compute them correctly. Professionals with Registered Tax Return Preparer status can provide business owners with the record keeping information they require. This permits them to obtain tax deductions for business use of a vehicle for deliveries, errands, and travel to business events.

A taxpayer must have a mileage log regardless of how the tax deduction for vehicle use is calculated. A separate log is required for each business vehicle. The mileage log records the business purpose of each usage event and the number of business miles driven. An income tax course provides the specific details required. Consequently, a RTRP can properly advise business owners about maintaining a mileage log.

There are two methods for deducting vehicle costs that are permitted by the IRS. One of these deducts actual expenses and the other uses a standard mileage rate. The IRS provides a standard mileage rate each year. This simplifies the record keeping for vehicle expenses. Only the mileage log is required.

The mileage rate includes almost all costs associated with use of a vehicle. Costs for parking, tolls, and financing are added to the deductible amount determined by the standard mileage rate. No other vehicle expenses are included as tax deductions when the mileage rate is used. The training received by a RTRP provides the knowledge to correctly calculate the deduction. There’s no reason to keep records of expenditures for fuel, maintenance, insurance, or the purchase cost when the standard mileage rate us used.

However, a business may choose to deduct all the actual costs instead of using the standard mileage rate. To do so requires the business mileage and the total miles for all purposes that the vehicle was driven. The percentage of business use is then multiplied by the amounts for actual costs. This calculation requires more records and the expertise of someone who has studied to become a tax preparer.

Most vehicles used for business purposes are also combined with personal usage. Self-employed proprietors simply use their personal vehicles for business. They only require coaching about maintaining a mileage log.

More careful planning is required by taxpayers who own corporations. Usually, they should have the corporation reimburse them at the standard mileage rate. Purchase of a vehicle by the corporation does not make it a business vehicle if it still has personal use. A mileage log is still required. In fact, a vehicle owned in the corporate name that is used by a shareholder for personal purposes causes a complication. In such events, the shareholder owns a reimbursement to the business.

Preparation for the tax preparer exam provides a RTRP with the ability to alleviate taxpayer confusion about business vehicle expenses. This not only simplifies record keeping. It also allows business owners to take the correct tax deduction for business use of vehicles.

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