Mazuma is now Vyde

It’s fairly common knowledge that some auto expenses can be used as tax write-offs, but today we’re giving you some of the common questions we hear about auto expenses and the finer points that go with them so you can make sure you’re making smart choices for you and your small business.

Question: Which is better – standard mileage rate or actual expenses incurred for your deduction on a vehicle used for business? 

Answer: It really just comes down to the numbers. 

Our standard rule of thumb – if the vehicle is smaller and has lower operating costs and maintenance expenses, it’s safe to say that the standard mileage rate is the better choice. If you’re driving larger vehicles, with higher gas mileage and expenses you’re more than likely better off with the actual expenses incurred method.

The numbers you’ll need to determine the number of miles driven for your business:

Question: Ownership – should the business, business owner or the employee have ownership of the vehicle? 

Answer: One of the simplest ways to manage ownership is to simply have the employee own the vehicle and then have the employer reimburse for business expenses. This is great for sole-proprietorships and the IRS is fairly fussy about write-offs on business vehicles so it’s important to follow the rules for your business type and keep detailed logs. 

Typically, when the vehicle is employee-owned, the business reimburses for business mileage incurred at the standard mileage rate. The amount received for documented business miles isn’t taxable to the employee and the vehicle expenses are therefore deducted by the employer. If you’re a single-member LLC and file a Schedule C with your personal tax return, you’re considered self-employed for tax purposes.

Make sure to ask your accountant, or read up on the IRS requirements, if you’re looking to purchase vehicles that will be owned by the company or business owner or manage a fleet of cars for a business that provides them to employees.

Question: Does it matter what type of car it is? 

Answer: You bet. Congress decided quite a few years ago that taxpayers should not be able to subsidize extravagant vehicles used by business. So what type of car is acceptable?

Things that don’t qualify:

Question: I’m new to the business vehicle concept, what do I absolutely have to know? 

Answer: Glad you asked. Here’s what we tell all our clients no matter the details of their particular situation. 

Question: How do I know which miles I should track for business? 

Answer: If you’re asking this question, you’re probably already tracking and have realized that “business miles” might be trickier than you thought. Don’t worry. 

To begin, write down your odometer reading on the day you start using a vehicle for business and on the day the year ends. Business miles are those actually drive for business reasons – to visit a customer, meet a client, pick up supplies, etc. Miles driven to the bank, office supply store, computer repair shop, or to meet with your accountant or attorney (if it’s for your business of course) can also count as part of your mileage deduction.

Some driving might seem business related but isn’t a viable tax write-off:

Question: What are vehicle expenses? 

Answer: Here’s our list. 

Sometimes questions arise while you’re on the road. We recommend tracking the mileage and expenses and then making a note to ask about these particular items as soon as you can. Once you have your answers you’ll be able to go back and adjust your log as needed and that way you’ll make sure to have accurate records and not miss out on any possible expenses.

What other questions do you have about vehicle expenses? We’d love to hear and answer your questions!


Download our tax savings guide for small businesses today!