Thursday, 17 November 2022

Business Vehicle Tax Deduction From Cash Tracks Financial

Business Vehicle Tax Deduction From Cash Tracks Financial

What Is A Business Vehicle As Defined By The IRS?

Can I Claim My Vehicle Expenses?

Tax Answers Advisor Podcast Transcript

Marcelino: Welcome to The Tax Answers Advisor, I am Marcelino Dodge. Will Rogers at one time was quoted as saying, “Income Tax has made liars out of more Americans than golf.” Well, I do sincerely believe that it’s true. You look at what happen in golf, and you look at the current situation today that still probably income tax is still making more liars out of Americans. Just from my own practice of what I’ve seen over 20 years in doing business of what one’s try to do and even reading over various cases from Tax Court where ones have tried various tactics and various schemes to try to save on their taxes and actually, in the long run, ends up costing them more.

When you need help with tax planning, financial advice, insurance, tax preparation or business plan, get information at Cash Tracks Financial.

Really do again, appreciate you visiting The Tax Answers Advisor today. I’m going to go and discuss again some weekly updates as I usually do at this time. The IRS is once again emphasizing how those who received PP loans and the PPP loans. The Payroll Protection Club Plan Loans, may not deduct the expenses paid with the loan bonds if they reasonably expect a loan to be forgiven in 2021. I have some clients who have already applied for forgiveness, have not heard anything from the banks yet.

So basically, many of them are exactly in that position. As well as if you did not deduct the expenses in 2020. And then some or all of the loan is expected to be forgiven but then is not forgiven. Once 2021 rolls around in the banks get back to speaking and replying to the PPP Forgiveness Loan Applications. While businesses may then be eligible to deduct some of these expenses on an amended return for 2020 now, in looking at this is maybe a case whereas when I worked with some people and talk to them on this as part of our planning.

We may just file an extension, like if it’s an S Corp for example, or a Partnership, we may just file an extension for March 13th. Because that’s when it’s due and wait to see what happens and maybe wait to actually file that 2020 tax return until later on in the year then of course, filing no later than September 2021. And hope that by that time they got that part figured out. So that’s a possibility that one can do instead of just filing the 2020 returns extension and wait if they possibly can.

Now, another thing just want to remind everyone of, is that $300 deduction for charities that everybody is getting for 2020 tax returns. And that is for donations to qualified charities, which is actually helping out a lot of charities this year with that particular deduction. And depending on your state, you may even get a higher deduction depending on what state you’re in as well. We’re just want to remind all that now particularly, is a good time to confirm any mailing addresses and email addresses with any employers you’ve worked with through the year, as well as banks or other institutions where you have accounts.

And also State Governments like if you got unemployment, especially if you have moved during the course of the year, now’s a good time to get all those address, check all those address corrections made. Because you want to make sure you get your W-2s on time, get your 1099s on time, from all of the areas where you’re going to get them. So, start working on those addresses and email addresses to make sure they are all up to date because some employers especially larger employers, and even some smaller employers now, have the means to put W-2s out electronically through an employee portal.

And so it’s going to be vital that that is still accurate, whatever email they address. Now something also to keep in mind as an independent contractor for many years, you’ve been getting a 1099 M or 1099 miscellaneous form. Well, the IRS for Independent Contractors is reviving a form that hasn’t been use since the early 1980s. So basically, what that means like for me, I’ve been doing this business for 20 years now.

I’ve never seen this form, at least never used it, I should say or had anybody ever have it because it hasn’t been used. It’s a 1099 NEC that’s going to be issued out to Independent Contractors, basically those who were paying $600 or more for their work during the course of the year. So, you want to make sure that, as a contractor that the people you worked for, or have the correct address. So that they can send you the form.

Then one other deal just want to remind all that, if you got insurance through an exchange, that is one of the states whatever the exchanges called the names vary per state. Whatever that exchanges and you got a tax credit, the premium tax credit, help pay for your health insurance. Make sure that they have the right address and you have your login to be able to go in for your 1095 A which most people should be pretty much used to this by now.

But, still you got to make sure you have that form that’s a 1095 A, and that is absolutely essential with your tax return. Now, the reason it is, is because the premium, the tax premium has to be reconciled. That advanced premium tax credit with your tax return because if you don’t have that information on your tax return, you’ll get a nice little letter from the IRS a few weeks later saying, we’re holding up your refund.

Because you didn’t send submit this form. So it’s vitally important that you have that and you bring it to your tax preparer, upload it to their portal. Now as we’re looking ahead as we’re talking about business vehicles today as part of our planning that we do with our clients through our Intelligent Solutions Program, is helping them to understand their business vehicles as well know exactly what a business vehicle is because there’s so many solutions and sometimes clients will come in and visit with us about a variety of items.

And we always encourage clients as part of our solutions program, you’re thinking about making any type of business move and this is whether you’re a sole-proprietorship, you’re a corporation, a Partnership, LLC, as part of our solutions program and you’re going to make that move such as looking to get some type of vehicle for the business. Come in. Let’s talk about it because part of our program includes services.

Such as that, so we can help you to make sure you make the best solution and apply that for you as we go as we review your success indicators, look at your specific data and see how getting a business vehicle works in with your overall action plan that we develop. Maybe we need to go back in, review some of your key data, look at your success indicators. And look at your goals and say maybe they have changed, which is really nice about a program.

Because if when one gets a business vehicle or looking to get a business vehicle, sometimes that’s a unexpected change during the course of the year, which is really nice about having a professional such as us come in helping you in assisting with these areas. That way, as we examine the solutions, look at your success indicators. Look at all that key data in both business and personal finance is helping you to be successful, then helping you with your action plan to see okay, we want to get we want to look at getting a vehicle or maybe you’re not looking at getting it right away, but you’d like to target as part of your action plan to get that business vehicle later on in the year.

Well, we can take that vehicle that planned, maybe you have an idea of what it’s going to cost or what you’re wanting to spend, whether perhaps it’s a new vehicle or a used vehicle. We can create that as part of your action plan and help you understand how that business vehicle applies to your business and how you can deduct that vehicle in your business and then how you can then actually acquire that vehicle as part of your action plan.

And maybe for 2020 ones we’re looking at maybe that’s one of your top priority items, we get perhaps a couple, couple debts reduced, or a couple other areas done, then Okay, now we’re ready to look at getting at the vehicle. What do we need to do to get to the vehicle? That’s our priority item. And then part of our working year-round helps you to get that. And then of course, as we’ve helped you plan, helps you to get to that business vehicle as part of your business. As part of your access to myself and other members of our team here.

We work around the year to help you out and to help your compliance needs be met, which that does include the filing of your federal and state tax returns where applicable. And then of course, we have this all the monthly fee, you can look it over our whole plan. It’s on our website, which is cashtracksfinancial.com, we have a personal growth and business growth depending on whatever you are going to do. And so, what we need you to do is just be aware of that and know that indeed, you need to do something there.

So anyway, what we’re going to go ahead and do at this point is talk a little bit more about “Business Vehicles” for you. Think about this, as we look at it is that at one time prior to 2018. Because of the change with the Tax Cuts and Jobs Act, vehicles for business use, or an unreimbursed employee business expense was a deductible expense a person could track mileage on their vehicle, take vehicle expenses, and then use it as part of their itemized deductions.

But with the Tax Cuts and Jobs Acting beginning January 1st of 2018, ones were no longer able to use it as a unreimbursed business expense. And that’s how it is under current law at the moment. Now what we want to keep in mind and think about also something that’s always been the law and that has not changed is also the fact that when you drive from your home, you’re an employee, you drive from your home, to your place where you work.

And this is true whether you drive one mile from your home to your place of work, or you drive 60 miles from your home to your place of work, you’re an employee of that business, you get a W-2 at the end of the year. All of those miles still are considered commuting miles and were considered commuting miles even prior to 2018 and thus commuting miles then were not a deductible expense before 2018 and still are not at a deductible expense into 2020 and moving forward under current law.

What we’re considering here then is going to look more as we look at a business vehicle we’re going to be looking at a more from the standpoint of an individual who is self-employed, perhaps as a Sole Proprietor. And there’s going to be much in here even if you are an entity like corporation, S Corp or LLC and how these entities and a lot of these information I’m going to share today applies across the board.

Not going to get into too much when it with regards to some of the depreciation and some of the more technical areas, but just looking at it say, okay some basics of how can I deduct a vehicle? And what kind of vehicle fall under certain categories and what I’m looking at there. So what we’re gonna do is we’re gonna take a little break now, and then we’re gonna come back. And then delve into this even deeper when we come back here. This is Marcelino Dodge on The Tax Answers Advisor on The Voice America Business Channel.

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Today’s tax and financial environment is constantly changing. Tax laws change rapidly. The traditional reactive approach to tax preparation and taxes no longer works. To deliver the best possible outcomes in today’s world. You need a year-round approach to take advantage of tax law changes and to pay as little tax as possible. Marcelino Dodge of Cash Tracks Financial helps his clients to implement proactive tax strategies throughout the year to limit his client’s tax liability. Plus, with this year-round approach, clients can increase their cash flow and be as prepared for the future as they can be. Email Marcelino at success@cashtracksfinancial.com or call 844-394-4287.

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This is The Tax Answers Advisor with host, Marcelino Dodge. To reach our program today please call in the number is 1-866-472-5790. That’s 1-866-472-5790. You may also send an email to success@cashtracksfinancial.com. Now back to The Tax Answers Advisor.

Marcelino: Welcome back to The Tax Answers Advisor. This is Marcelino Dodge, I appreciate you tuning in for this portion of the program as we’re talking about business vehicles and taxes. What exactly a business vehicle is? And what is going to take to be able to accurately take a deduction for a business via vehicle on a tax return. This would be either an individual tax return, and this could be used in regards especially like a Schedule C, a sole-proprietor or an entity, like a corporation, S Corp, LLC.

Those are the areas where we’re going to look at mainly here. And of course, there’s some places where you can take some vehicle business expenses as well, that would be like on farms. Or if you have rental houses as well, there’s a lot of crossover and similarity in these, but in a lot of the rules are pretty close to the same. So a lot of what I’m talking about here today, you can use across the many different forms and tracking on your vehicle, whether it’s deductible, and how much you can actually deduct on your vehicle for the course of a tax year.

One of the common misconceptions that I do encounter with business vehicles in business is a client comes in and says this is often with their passenger car, and it can even be a pickup truck in construction. Now, of course, many people will use their trucks in construction, or maybe their sales, a salesperson using their personal automobile. And of course, some of these things vary under our current circumstances. But still, the basic principles these would be very useful once we’re out of this COVID restriction.

Now as we look at this, just because you take a sign, you go and buy a magnetic sign, or perhaps you get some type of sign that permanently attaches to your vehicle. And you attach that to your vehicle that doesn’t take and make your vehicle although is all of a sudden 100% deductible when it comes to taxes. It’s not a matter of what is on the vehicle that makes the difference as tax deductibility. Its actual use of the vehicle.

And this can be a passing regular passenger automobile, which is defined as a four-wheeled public use vehicle that you can use on any road or highway use is generally what it’s discussing about. Now there’s a few vehicles that are kind of excluded from this area for a certain area called Listed Property. And this is these exclusions include things like ambulances, Hirsch, taxis, non-personal trucks, or vans, things that are mixed as far as non-personal trucks and vans.

Those are areas such as cargo vans, bands that are being mainly used for using like tools and those kinds of areas. Usually those aren’t excluded in these areas of what’s considered listed property, which that’s a whole another set of rules when it comes to IRS and tracking. So we’re not going to focus on those rules too much on this show, what we’re going to mainly focus on today is just how does once again your vehicle be deductible?

Now some of these vehicles also that we’re going to talk about, of course, is pickup trucks, sometimes you can have a pickup truck that you use. And I see this often with various construction companies. And these can be a sole proprietor construction company, it can be an LLC construction company, but they all have pickup trucks. Now the difference is when we look at when it comes to a vehicle for an entity, like an S Corp, a C Corp, or an LLC, is that in those particular cases, to deduct a vehicle, one of the main things you need there is that that vehicle needs to be registered and actually owned by the entity, it should not be in your personal name at all.

That is what I absolutely require of all the businesses I work with, okay, got this vehicle, you can say this is a business vehicle well has to be make sure it has to be registered, licensed everything in the name of the business so that it shows up as a real business expense in the event of audit. Now, and this, I don’t know exactly what you would use a motorcycle for. But you can I mean get various delivery services could use motorcycle perhaps. So that’s another area you can do. Now, there are some vehicles that you got to be just that are also excluded in certain areas as far as how you track them and how you use them. There’s a long list of these in the IRS rules and guidelines in regards to some of these, but just some of these vehicles that we’re not going to not going to be covered in this because they’re actually deducted differently and separately because of the rules.

And these are such items such as over the road trucks. The ones that we see every day are wonderful truck drivers who haul a lot of freight around the country that we rely upon. Those types of trucks are not considered in this area. They’re their business type vehicle, but we consider them differently. We don’t track mileage we could, but vast majority of the truck drivers I work with and companies that I work with.

It’s all actual expenses with those and they’re coming to a whole different category. And another area vehicle is cement mixers, dump trucks, farm vehicles tractors, and there’s like say there’s so many of these on this list that are excluded that we’re just going to go into all but there’s many, many of them. And we can certainly discuss what vehicles come into that during a discussion here at the office.

So a business vehicle basically is going to be a vehicle, as we’re focusing on here, basically, looking at pickup trucks could be an SUV, by the way, could be your regular passenger, four-door automobile, anything that falls within that’s basically the type of business vehicle we’re discussing today. Now, business requirements, when you’re really looking at trying to determine or know, if your vehicle is a business vehicle on how much it’s used for business is its actual use.

To get many of the deductions that ones are looking for, we have to have more than 50% business use of the vehicle. And even I even recommend having that 100% if you’re really going to seriously take a deduction of a vehicle. Now one of the biggest areas, when I looked through various reports from the Internal Revenue Service in regards to vehicles, one of the biggest issues that exist with business vehicles is the fact of lack of accurate record-keeping for business vehicles.

And what do I mean by exactly record-keeping? Well, what we’re looking at when it comes to record-keeping and business vehicles is that it’s particularly as a sole-proprietor because so much crosses over between individual and business, is the fact that you got to be able to show business use of the vehicle. And when ones take a lot of expenses on their vehicles, and they don’t have documentation that shows the business use of the vehicles that can cause a red flag with the IRS.

And so it is absolutely vital that you have good records. Now, one of the areas that I always, always say is absolutely essential that can back up your business use of the vehicle is a mileage log in regards to the vehicle. So with that on a mileage log, which these are just absolutely essential. You can do it. You can do a paper log, which some people still do paper log and that would be certainly acceptable to the IRS on that to prove business usage.

And I’ve had many clients who do actually paper logs because it works for them. Now another option, of course is that you can use an app for smartphones today. An app such that as mile IQ which is a very handy app from what I understand and there’s a few others that you can use and kind of play and see what type of app would work for you to track mileage if that’s what you choose to do but that’s I just absolutely needed to do so.

You can then with those apps whether you do something on paper, or you do something through an app. You need to have one of the most important things is how to have, okay, this is what the mileage was at the beginning of the year. Like January 1st, January 2nd writing there you need to have what the beginning mileage was for the year. And also what is essential with these accurate records is if you’re getting like oil changes, or buying tires which is I give a lot of credit to these maintenance shops.

Wherever you go change your oil leaks, all the ones I work with are fabulous. To get some other work done on your vehicle, and they’re fabulous in the sense that what many of them do is that they’ll take your year, make, model, the ID number the VIN number of your vehicle. And what is very important there is that, then they’ll take their record the mileage of when they did said work on the vehicle.

And in many cases that is on the invoice that you receive from them when you go to pay. And that is really nice because you have your record that you’re keeping, your mileage record you’re keeping, which includes the dates you went, the beginning miles that day ending miles that day. It’s recommended that you also have on there, who the client was you visited that day. And then what the purpose of that trip was, whether it’s perhaps, delivering some type of materials or making your consultation with them, or whatever the case or just, just making a plain delivery so all of that is important there.

And then on that mileage you take that mileage and you add it up for the month which there’s little books you can use I used to give out these little really nice little mileage books. Yet, you take that and then of course, if you’re doing it through an app you take that, and then what’s really nice is that if you ever need to prove your business usage, not only do you have in this mileage record that you personally kept. The maintenance records that you keep with the invoice from your repair shop, or from an oil change place where you get your oil, maintenance and many times. What’s nice about that, especially if you’re driving a lot is that you’re doing it a couple times a year. Excuse me, you’re probably doing it three to four times a year, maybe even five or six depending on how much mileage you’re putting on your vehicle, and each time they do that, boom, boom, and boom they’re recording the mileage so then not only do you have what you prepared, then you have a third party.

That’s also saying, these are the miles that were on that vehicle. Then you come back at the end of the year you get to December 31th, as we’re coming up to here and then, you have the ending mileage that you put in for the year. So, then you’re able to take what you had at the beginning of the year in January, then you have a December so then you come up with a total mileage number. And then, look at all your business miles you have. That gives you exact basically an exact percentage of how many miles you use for business.

Now in some cases that may actually be 100%, and especially in the case of a sole-proprietor that that’s vital, and it’s vital as well I would say even for corporations, LLCs and partnerships. Now we’re gonna go ahead and take a break here and come back and talk a little bit more about these business vehicles use requirements, look at some expenses and so on. As we come back in a couple minutes on The Tax Answers Advisor, I’m Marcelino Dodge on the Voice America Business Channel.

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Today’s tax and financial environment is constantly changing. Tax laws change rapidly, the traditional reactive approach to tax preparation and taxes, no longer works. To deliver the best possible outcomes in today’s world, you need a year-round approach to take advantage of tax law changes, and to pay as little tax as possible. Marcelino Dodge of Cash Tracks Financial helps his clients to implement proactive tax strategies throughout the year to limit his client’s tax liability. Plus, with this year round approach clients can increase their cash flow and be as prepared for the future as they can be. Email Marcelino at success@cashtracksfinancial.com or call 844-394-4287.

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This is The Tax Answers Advisor with host, Marcelino Dodge. To reach our program today please call in the number is 1-866-472-5790. That’s 1-866-472-5790. You may also send an email to success@cashtracksfinancial.com. Now, back to The Tax Answers Advisor.

Marcelino: Welcome back to The Tax Answers Advisor. This is Marcelin Dodge, I appreciate you listening to this program. In fact, I appreciate listeners throughout the world of course here in the United States but yet, even those listening to this podcast in China, Germany, and Ireland and other countries. Very much appreciate that, coming in and taking in this valuable information as we’re talking today on business vehicles.

Business use of vehicles, right before the break we were discussing about some accurate records regarding mileage logs in particular and how those are so vitally important and you can do those on paper, or you can do those through some type of app through a smartphone, and then how that can work together in harmony with your maintenance records, as well. How all of that can work together to help you in the event of an IRS audit of some sort to support, mileage expenses or actual expenses, you’re taking on your tax return.

And those can usually be a red flag, especially if you have 10s of 1000s of dollars of auto expenses. These types of records are just an absolute must. As we look into the next little section about the expenses that come in when you do have a business vehicle and you’re wanting to take these expenses there, you’re looking at keeping the good records of what you have done, you’ve kept your mileage log doing just wonderful, you’ve been keeping receipts of other items in regards to operation of your vehicle.

Now let’s stop and take a little bit more at some various local expenses that can encounter from your vehicle. Now depending, especially if you’re a sole-proprietor or another type of business person, because even as a corporation or an LLC, you may be working out of your home. Under these circumstances, and you may need to be doing some travel so you may have to travel, if your main office is in your home, which can be true, and in many cases is right now.

You may have to drive to from there. And if you’re by chance still seeing clients or visiting various offices around, or if you’re delivering packages as part of a business that you’re doing whatever the case may be.

You’re vehicle you’re using for business that drive from your home office as a self-employed person to another place, that is based that would be your business mileage that would be deductible trip. And each time you go and then you go from that point, to that point, to another visit, to go visit another client or maybe go pick up supplies or maybe you’re going to a local box store to pick up supplies for the business. Or if you’re traveling, to out town, to go get all I mean all of that stuff is basically deductible type of expense that you can go ahead and take.

And when you go to visit clients as I mentioned, from your home office that also is considered a doctor’s deductible expense. Now, if there’s any meetings, you’re having away from home business meetings which, under circumstances may not be happening. But yet, could be returning sometime next year depending on just what happens with this virus floating around but, if you do have a business meeting you’re traveling to that would also be a business type of expense and of course we’re talking business meeting.

This is not just a meeting for like the natural client that you’re gonna meet to perhaps, do business with, or to sell something or consult with them. These business meetings would also include training sessions, like myself, I had previous years had traveled two to three hours away from my place where I am up to another place like up to Denver, Colorado, or maybe down to Amarillo Texas somewhere, for example, a couple years I’ve been to, or even Las Vegas, Nevada.

Those would be considered a drive that would be a deductible expense as far as my vehicle. And so, because that’s for education, it’s for business purposes, or if there’s another business related purpose you’re traveling for. That could be a business use of your vehicle as well because it’s away from your workplace. And so those are good points to keep in mind when you’re driving and that can be true as well if you’re just traveling a few miles around your local area, wherever you are.

You can have a mile here, two miles here, or three miles there, and good those are all good to keep logged in. Now we’re going to take a look here. Now that we’ve helped to establish exactly what an expense is going to take an actual look at this point at some various expenses, one of the most common ones that usually comes up is has to do with depreciation. How much can I depreciate, my vehicle? I paid 40-$50,000 for my vehicle, can I depreciate it?

Well the answer to that question is yes, but to do depreciation, we need to do actual expenses, and with actual expenses once again relates back to what I talked about earlier about having an accurate mileage log which I highly recommend. No matter how you do it, whether you take actual expenses, based on the percentages in your mileage log, or if you take the actual miles driven you that mileage log is just an absolute must. That helps us to determine how much depreciation to take.

And there’s even limits in the Internal Revenue Code, about how much depreciation you can take on a vehicle. Now, on a new vehicle. If you get a new vehicle, and not to use when you buy a new one, there’s a couple areas that kick in here. One, is that what’s called a section 179 deduction you can take part of it as that tax deduction. Then there’s also, there’s a big talk about bonus depreciation, you may be able to take that as well. And so we do that, you can take those two.

And basically, how much do you take for those is the question that then comes up. There’s what’s known as basis we’re basically comes down to how much you have paid for the vehicle. These are determined by not just what you paid the dealer. But there’s ordinary and necessary costs that you had to put out in order to even put the vehicle in service to begin using it. And there’s tax title licensing all kinds of expenses.

And then, that gives a number as to what you can actually take as part of your basis in the vehicle, which then helps to know how much depreciation, and actually some of these items that I mentioning applies even if, even when you purchase a used vehicle. Because not everybody I know goes out and just place the money down and gets a brand new vehicle. Sometimes you’ll go and get a used vehicle something that’s two or three years old. Well, the basis costs, apply the same.

The only real difference is that your used vehicle may not have the limits as the new vehicle meet, and they may or may not and it just kind of depends on the circumstances, but you got to keep in mind when you go and buy the vehicle, these ordinary necessary costs to put your vehicle in service. And this is true whether it’s like a passenger automobile or a pickup truck that you’re getting to use in your business these costs, you got to really consider and think about, and be able to add up which is essential for prepare like myself to have all the information, which is why when I work with individuals on a year-round basis.

I encourage them okay you want to go buy the vehicle, great, great, please make sure you bring me that bill of sale. As soon as that purchase is complete, so I can have it as part of the file we can put it as part, put it together as part of the plan we’re working on your action plan, and then be able to make whatever moves, other moves need to make through the rest of the year. Now there’s also different methods that how we can depreciate it, and without going into too much detail.

That’s where, as I work with someone and I sit here and visit or we visit through an online meeting and really get to understand and know you, know your business, have an understanding because we’ve sat down and established your goals, we condense it down and figure out exactly what is the best method for you Mr. client in this particular instance, in the preparation of your tax return. Do we take the section 179 deduction? Or do we take bonus depreciation? Or do we not take a section 179, and then, just carry depreciation over the five-year life of the vehicle?

It just really depends, each circumstance is different. And then that percentage that we use is all based, if we’re doing actual expenses. I mean it’s not just depreciation that falls in there, it’s other areas such as fuel, insurance, other maintenance costs, tires, repairs license and so on and go on and on. There’s several actual expenses that can kick in and those are all done according to the percentage of the mileage law, which knows how much I keep referring back to the mileage log. Yes, that is an absolute must.

Now then, going off of actual expenses. We can also just take standard mileage because we’ve had a mileage log. Now for 2020, we’re looking at 57 and a half cents a mile, 57.5. I don’t know where they, why they put this half a cent in there but they do, that’s just how it works. About 26 cents of that is rated for depreciation by itself, so then when we actually take mileage. We’re oftentimes going to. Well, we have my depreciation as a part of it, it’s just that simple.

Now, there are some areas that are not included in the standard miles that you can take in addition to it. But, many of the expenses I mentioned earlier already, such as depreciation, fuel insurance, and other maintenance costs, those are all a part and included as part of the standard mileage rate that you’re given, the 57 and a half cents a mile. Now, there are some fees that you can still take things such as parking fees, you still deduct those as a part of your business expense. You can also take interest expense on a loan.

So you got a vehicle, you borrowed but paid 50,000 for a vehicle, so you got a loan on 30,000 of it. While they’re gonna have interest on that loan or say two or 3% at current rates, that little bit of interest you can still take as a deduction. Then if you pay tolls which various roads around the United States you’re gonna pay a toll to use be it like the Kansas Turnpike or E470. Up and up near Denver, you’re gonna pay a toll. Well, you can take that as well.

Now something that is very important here in regards to standard mileage is that you need to take that in the first year of service in order to be able to take it in later years. It’s just really that simple about that. So, if you so in the first year of having a vehicle. If you do actual expenses and you’re basically stuck, you got to do actual expense each year and calculating it so once again, a mileage log will be good but you’ll have to do actual expense so you want to do standard mileage. Well do it year one.

This is also allowed, which is really nice feature is that if you have four or fewer vehicles you’re using in your business and their business vehicles that fall under this, you can use the standard mileage rate, which is just something marvelous and beautiful to do. And I’m actually very big on the standard mileage rate, because, at least in most of the cases I have worked with that has yielded a bigger deduction for the individual. Now of course, as part of our planning and working together part of our year-round process, this is not a set in stone deal.

I mean, that is my preference. But then, as I sit and I look at individuals, look at their circumstances, look at their overall business. I sit down, I take a look at that and go. This year, let’s discuss the advantages and the disadvantages of what this is gonna do for you. Now we’re going to come back and finish up this discussion about actual expenses and standard mileage for business vehicles. When we return in a couple minutes on The Tax Answers Advisor. This is Marcelino Dodge on The Voice America Business Channel.

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Today’s tax and financial environment is constantly changing. Tax laws change rapidly. The traditional reactive approach to tax preparation and taxes no longer works. To deliver the best possible outcomes in today’s world. You need a year-round approach to take advantage of tax law changes and to pay as little tax as possible. Marcelino Dodge of Cash Tracks Financial helps his clients to implement proactive tax strategies throughout the year to limit his client’s tax liability. Plus, with this year-round approach, clients can increase their cash flow and be as prepared for the future as they can be. Email Marcelino at success@cashtracksfinancial.com or call 844-394-4287.

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This is The Tax Answers Advisor with host, Marcelino Dodge. To reach our program today please call in the number is 1-866-472-5790. That’s 1-866-472-5790. You may also send an email to success@cashtracksfinancial.com. Now, back to The Tax Answers Advisor.

Marcelino: Welcome back to The Tax Answers Advisor. This is Marcelino Dodge, I really appreciate you still being here for this final part of this program today. And we’ve been talking about business vehicles deduction. Business vehicles do we use actual expenses? Do we use standard mileage? There is no real while there’s advantages and disadvantages both ways, it just depends on each individual circumstance. What is best for you as our client? We sit here and we’ll sit down to discuss standard mileage, the advantages.

This is what the deduction does for you, or we look at actual expense and say this is what the deduction would be. But as I’ve mentioned numerous times throughout this program today. It is an absolute must that you have an accurate mileage log to support the business use of your vehicle. And as I mentioned, the standard mileage as well, is very important to use in the first year of service if you want to be able to use it in other years of service, and you can use it on four or fewer vehicles.

Where we can really get into a challenge is when you go to using actual expense in the first year. You cannot go back to mileage, if you started with actual expense and another point with actual expense of your vehicle is, it’s also a requirement. If you have five or more vehicles in your business if you’re running some type of fleet, which usually and you get into five or more of some sort, you actually have to do actual expenses.

And I recommend once again for all businesses that you use an accurate mileage log to support all the business usage of your vehicles if you’re going to take them as a deduction in your business. Now, I haven’t talked about leased vehicles yet. Now these are almost a whole another animal and a whole another set of rules that come in. But just kind of short and sweet on these, we want to mention that on leased vehicles, you can do the same. You can do actual expenses on these.

Or you can take again the standard mileage which is 57 and a half cents per mile on a leased vehicle. And when you do take a leased vehicle, you can end up deducting or be able to deduct part of each lease payment as part of your actual expenses. So, just a quick top off and what we’ve covered today, in today’s program exactly a business vehicle and traveling from your main home which can be a separate office, or as many people are doing today working from home.

You can take that as a deduction when you leave your main home from business or your main office, whether you’re a corporation, LLC, partnership or a sole-proprietor, you can take that as a deduction when you leave your main office, especially if it’s in your home. Well the variation though is that if your actual place of business is like an actual commercial business. Then you actually got to get to your office, where your commercial business is and then from your office to other locations becomes deductible.

That is something I didn’t mention earlier but it’s something definitely to keep in mind and remember. If you’re going to use a vehicle for business, definitely recommend again, that if it’s going to be 100% use vehicle, make sure you keep it at 100% use. And also if you’re an entity of some sort and you want it to be deducted by your entity, your corporation, your LLC, your partnership, your S Corp, make sure that vehicle is titled and registered in the name of the entity.

That way, the entity can take it as a deduction and you can make sure and have it they’re absolutely essential, and I highly require that for clients. And then as I’ve mentioned numerous times through this podcast today. It is a must to have a accurate mileage record, that has the clients name, the business purpose of the trip, the date, the miles. That way once again, you have the records to back up what you are doing with your vehicle in business.

Especially, if you have 10s of $1,000 of dollars of information, the information and deductions you’re using to deduct from your tax return that little line that says, auto expenses, auto deduct on the tax return. That’s gets up to 40, 50,000. I mean, you can have legitimate expenses, but you got to have the documentation to back it up because that could trigger an audit and I have seen and read in a lot of publications. How many people have lost? And the reason they’ve lost is because they did not have good mileage logs.

Then as I mentioned, also, you want to make sure you get maintenance done on your vehicle and I would say always have it done by a third party if you’re going to do maintenance. Because, that those third parties like the repair shops and oil change shops, they always take the mileage and they put it on that invoice and that’s an additional verification for you. That’s an extra little good backup for you to have.

And as we talked about meetings, away from workplace those are good and deductible there many expenses you can take local expense and traveling. If you’re doing actual expenses on your vehicle, once again, based on the percentage on your vehicle that you’re using, now we’ve got to be careful of is that if you’re using your vehicle for business, usually the simplest thing to do for most businesses, and most people that I’ve worked with, especially if you’re a sole-proprietor, usually the simplest is to keep a good mileage record.

And just to take mileage as a part of your expense. And so, as I sit there and visit with people, we look at various numbers for you, we look at your goals where you want to go in business. Setting up and working with you on a business vehicle is just one part of what we do overall. We help you to establish goals for you personally, and for your business. And what’s based on what you want to accomplish most, so that you can get the maximum deduction from your vehicle.

And as we look at your key success indicators, we look where you are, where you’re going. And if getting a business vehicle is a goal you have, that’s a goal through our year around process that we can help you to get to. Then as we ID threats, we neutralize those threats that can get you to that business vehicle or if you have a business vehicle and you’re wanting to upgrade through our action planning process that will help you to absolutely get there, so that you can be successful because that’s our goal.

Is to do heavy lifting for you throughout your financial life, allowing you to spend time on what you love to do. And especially in these times we’re in right now, a little bit of guidance, and a little bit of help is always a good thing. And certainly, we want to invite you to visit cashtracksfinancial.com, to look at our processes a little bit more both our business growth, our personal growth areas. How those can help?

Nice area that also is on my website cashtracksfinancial.com. is on the main menu, there’s tax organizers and forums. And that area has a lot of information, good information, that fits in right will be talked about today for business autos and how you can deduct business autos, has sample mileage logs that you can use to help you to get started there, easy to print there for you, and a lot of other information, perhaps for your type of business, there’s a lot of specialized business information in there.

Like, for example, other businesses like Daycare Centers, over the road truck drivers, and a whole list of other items and information that can be just so useful in helping you during your planning process. And I also can help you as we work on helping you to be successful in your financial life. We’re going to invite you back next week to The Tax Answers Advisor, as we’re going to go on to discuss about, “Prepare for 2021 by reviewing tax changes in 2020”. Yes, vitally important because 2020 wasn’t supposed to be that big of a year of changes, but we had a lot of changes.

So, we’re going to touch on all those as we look forward to speaking to you again next week on The Tax Answers Advisor. I’m Marcelino Dodge on The Voice America Business Channel.

Thank you for listening to The Tax Answers Advisor with host, Marcelino Dodge. We’ll be back again next Wednesday at 6pm Eastern Time and 3pm pacific time on The Voice America business channel. We’ll have more to share next week.

Cash Tracks Financial Inc.
117 W Beech St
Lamar, CO 81052
Office:(719) 336-8739
Toll Free: (844) 394-4287
Fax: (719) 336-8799
Email: success@cashtracksfinancial.com

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When you need a financial or tax advisor, tax prep, insurance, or business guidance contact Cash Tracks Financial Inc., serving Lamar Colorado.

success@cashtracksfinancial.com

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117 W Beech St, Lamar, CO 81052, USA


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