It comes down to whether you have the goods; the documentation.
If you have the documentation, you are supposed to have, you win; end stop.
Vehicle expense is a legitimate business expense.
For many self-employeds it's the biggest deduction. It's critical to get it right.
The 2 methods of deducting vehicle expense for owned vehicles are:
standard mileage rate method
actual cost method
One thing to remember . . . a business expense cannot be extravagant. You be the judge. Buy a lamb and deduct it 100% at your own peril.
The Standard Mileage Rate
The current mileage rate (last half of 2022) is 62.5 cents per mile.
Your deduction is simply the number of business miles, per the mileage log, multiplied by the standard government mileage rate.
The Actual Cost Method
Add up total (biz & personal) actual costs for the year (gas, insurance, repairs, interest on loan, DMV, tires, washes)
Your deduction is the total cost multiplied by the business % driven. This % is taken from the mileage log.
In addition, the cost of the vehicle can be depreciated. Amounts vary but are based on the vehicle's biz % use.
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Please consult with your personal tax advisor before deducting vehicle expenses.
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One thing remains true . . . keep a mileage log. Period.
Deducting vehicle expense might be your biggest expense. You've got to follow the rules.
Keep a mileage log with:
number of miles driven
to whom or where did you drive
for what business purpose was the drive
Use 1 of 2 methods:
Standard mileage rate
Actual cost
I write about living the self-employed life from the perspective of a CPA. I reduce taxes and simplify complexities.
Hit me with a reply on any topic you'd like me to write about. And don't forget to stand up for truth, lower taxes, and fair play.