In our previous two posts, we discussed the complete write off method and standard mileage rate method of deducting car expenses for a business. Now we will introduce the third method - Actual Cost Method.
Method 3. Actual Costs Method
In this method, you need to keep track of all of the costs related to your car (gasoline, insurance, depreciation, etc.), if the car is used for both personal and business uses, you need to estimate how much of those costs is related to business use. There are lot of receipts to track under this method.
In Summary
There are 3 options a business owner can use to deduct car related business expenses, if you just bought a new car and don't use the car a lot, a complete write off method is the best one, otherwise, the standard mileage rate method is recommended for its simplicity.
Method 3. Actual Costs Method
In this method, you need to keep track of all of the costs related to your car (gasoline, insurance, depreciation, etc.), if the car is used for both personal and business uses, you need to estimate how much of those costs is related to business use. There are lot of receipts to track under this method.
In Summary
There are 3 options a business owner can use to deduct car related business expenses, if you just bought a new car and don't use the car a lot, a complete write off method is the best one, otherwise, the standard mileage rate method is recommended for its simplicity.
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