In trod u ction
If a pr opr iet or own s or lea ses a veh icle t h a t is u sed for bu sin ess pu r poses, t h e pr opr iet or sh ip m a y dedu ct bu sin ess ca r a n d t r u ck expen ses on lin e 10 of Sch edu le C.
Th e dedu ct ion m a y be ca lcu la t ed u sin g on e of t wo m et h ods a u t h or ized by t h e IRS:
1. t h e st a n da r d m ilea ge r a t e m et h od; or 2. t h e a ct u a l expen se m et h od.
Th is sect ion discu sses bu sin ess u se of a veh icle, expla in s t h e ca lcu la t ion of dedu ct ible veh icle expen ses, a n d in t r odu ces t a xpa yer s t o t h e r ecor dk eepin g r equ ir em en t s for bu sin ess veh icle dedu ct ion s.
B u sin ess U se of a V eh icle
Loc a l t r a n s p or t a t i on —c om m u t i n g fr om h om e t o w or k
Th e cost of com m u t in g fr om h om e t o a pr opr iet or ’s r egu la r wor k loca t ion is a n on dedu ct ible per son a l expen se. Th u s, wh en a pr opr iet or u ses h is veh icle t o com m u t e t o a n d fr om h is r egu la r wor k loca t ion , h e h a s n o bu sin ess m ilea ge. Th e fa ct t h a t a pr opr iet or m a k es bu sin ess ph on e ca lls, en ga ges in bu sin ess con ver sa t ion s wit h pa ssen ger s in t h e veh icle, or u ses t h e veh icle for
bu sin ess a dver t isin g wh ile dr ivin g t o a n d fr om wor k is ir r eleva n t .
Loc a l t r a n s p or t a t i on —ot h er
F or exa m ple, wh en a pr opr iet or dr ives bet ween bu sin ess loca t ion s, h e is u sin g h is ca r for bu sin ess t r a n spor t a t ion . Th u s, t h e m ilea ge bet ween h is r egu la r wor k pla ce a n d a clien t ’s office is bu sin ess m ilea ge. Sim ila r ly, t h e m ilea ge bet ween t wo cu st om er loca t ion s is bu sin ess m ilea ge.
If a pr opr iet or h a s a t lea st on e r egu la r wor k loca t ion , bu sin ess u se a lso in clu des dr ivin g fr om t h e pr opr iet or ’s h om e t o a t em por a r y wor k loca t ion in t h e sa m e bu sin ess in t h e sa m e m et r opolit a n a r ea in wh ich t h e pr opr iet or n or m a lly wor k s. E m ploym en t a t a wor k loca t ion is gen er a lly con sider ed t em por a r y if it is expect ed t o la st (a n d does, in fa ct , la st ) for on e yea r or less.1
E XAMP LE 1: Sh a r i m a in t a in s a n office in a down t own com m er cia l
su it e. Th e cost of Sh a r i’s t r a n spor t a t ion bet ween h er h om e a n d h er office is a n on dedu ct ible per son a l com m u t in g expen se. H owever , Sh a r i ca n dedu ct t h e cost of r ou n d-t r ip t r a n spor t a t ion bet ween h er office a n d a clien t ’s or cu st om er ’s pla ce of bu sin ess. Sh e m a y a lso dedu ct t h e cost of t r a n spor t a t ion bet ween clien t a n d cu st om er loca t ion s.
E XAMP LE 2: St eve is a self-em ployed con su lt a n t wh o m a in t a in s a n
office sever a l m iles fr om h is h om e. If St eve spen ds a few da ys wor k in g a t a clien t ’s office loca t ed in t h e sa m e m et r opolit a n a r ea in wh ich h e r egu la r ly wor k s, h e m a y dedu ct t h e cost of r ou n d-t r ip t r a n spor t a t ion bet ween h is h om e a n d t h e clien t ’s office.
E XAMP LE 3: Kelly is a self-em ployed a t t or n ey. Kelly a t t en ds a 3-da y
con t in u in g lega l edu ca t ion sem in a r in t h e sa m e cit y in wh ich sh e wor k s. Th e sem in a r is con sider ed a t em por a r y bu sin ess loca t ion . Th er efor e, Kelly m a y dedu ct t h e cost of r ou n d-t r ip t r a n spor t a t ion bet ween h er h om e a n d t h e sem in a r loca t ion .
E XAMP LE 4: F r ed is a self-em ployed m u sicia n wh o lives a n d wor k s
T ran sportation from a H om e Office
If a pr opr iet or r egu la r ly wor k s in a h om e office t h a t qu a lifies a s t h e
pr opr iet or ’s “pr in cipa l pla ce of bu sin ess,” t h e pr opr iet or m a y dedu ct t h e cost of t r a n spor t a t ion fr om h is or h er h om e office t o ot h er bu sin ess loca t ion s wit h in t h e sa m e m et r opolit a n a r ea .
E XAMP LE 5: Ca r l is a self-em ployed book k eeper . Ca r l wor k s ou t of
h is h om e office, wh ich qu a lifies a s h is pr in cipa l pla ce of bu sin ess. Ca r l m a y dedu ct t h e cost of t r a n spor t a t ion bet ween h is h om e a n d ot h er bu sin ess loca t ion s, su ch a s clien t offices, wit h in t h e sa m e
m et r opolit a n a r ea .
A h om e office m u st m eet sever a l r equ ir em en t s t o qu a lify a s t h e pr in cipa l pla ce of bu sin ess. Th ese r equ ir em en t s a r e discu ssed in Sect ion 13 of t h is cou r se, E xpen ses for Bu sin ess U se of You r H om e.
Ou t-of-tow n T ran sportation
If a pr opr iet or u ses h is or h er veh icle for ou t -of-t own bu sin ess t r a vel, t h e cost of t h e r ou n d-t r ip t r a n spor t a t ion is gen er a lly dedu ct ible. H owever , if a n y of t h e ou t -of-t own m ilea ge is for n on bu sin ess pu r poses, t h e cost of t h e
n on bu sin ess t r a n spor t a t ion is a n on dedu ct ible per son a l expen se.
E XAMP LE 6: Ren a , a self-em ployed book k eeper in Bost on , a t t en ded
a 1-week a ccou n t in g a n d t a xa t ion sem in a r in P r oviden ce. Ren a dr ove h er own veh icle t o a n d fr om t h e sem in a r . Wh ile on t h e bu sin ess t r ip, sh e dr ove a n ext r a 100 m iles t o visit a r ela t ive. Ren a ’s m ilea ge, exclu sive of t h e 100 per son a l m iles, is bu sin ess m ilea ge.
If a pr opr iet or a ccept s a t em por a r y ou t -of-t own wor k a ssign m en t , t h e cost of r ou n d-t r ip t r a n spor t a t ion bet ween t h e pr opr iet or ’s h om e a n d t em por a r y ou t -of-t own bu sin ess loca t ion is dedu ct ible. In gen er a l, a n ou t -of-t own a ssign m en t does n ot qu a lify a s “t em por a r y” if it la st s for m or e t h a n 1 yea r .
E XAMP LE 7: Da ve, a self-em ployed con t r a ct or , lives a n d wor k s in
T olls an d Park in g
In gen er a l, t olls pa id wh ile dr ivin g bu sin ess m iles a r e dedu ct ible. Tolls pa id wh ile dr ivin g per son a l m iles, in clu din g com m u t in g m iles, a r e n on dedu ct ible. Th e cost of pa r k in g a t a pr opr iet or ’s r egu la r bu sin ess loca t ion is a
n on dedu ct ible per son a l expen se. Th e cost of pa r k in g a t ot h er bu sin ess loca t ion s, su ch a s clien t a n d cu st om er offices, is dedu ct ible.
E XAMP LE 8: Ca r la , a self-em ployed con su lt a n t , pa ys $100/m on t h t o
r en t a pa r k in g spa ce a t a ga r a ge a dja cen t t o h er office. Th e cost of t h e m on t h ly pa r k in g is a n on dedu ct ible per son a l expen se. H owever , if Ca r la in cu r s a ddit ion a l pa r k in g ch a r ges wh en sh e t r a vels t o ot h er bu sin ess loca t ion s, sh e m a y dedu ct t h e cost of t h e a ddit ion a l ch a r ges.
Calcu lation of th e Car an d T ru ck
E xpen se Ded u ction
As pr eviou sly m en t ion ed, a pr opr iet or m a y ca lcu la t e t h e ca r a n d t r u ck expen se dedu ct ion u sin g eit h er t h e st a n da r d m ilea ge r a t e m et h od or t h e a ct u a l expen se m et h od. Th e st a n da r d m ilea ge r a t e m et h od is ea sier a n d r equ ir es less r ecor dk eepin g t h a n t h e a ct u a l expen se m et h od. H owever , t h e a ct u a l expen se m et h od m a y r esu lt in a la r ger dedu ct ion . Th er efor e, m a n y pr opr iet or s ca lcu la t e t h e dedu ct ion bot h wa ys a n d select t h e m et h od t h a t r esu lt s in t h e la r ger dedu ct ion .
S tan d ard M ileage R ate M eth od
U n der t h e st a n da r d m ilea ge r a t e m et h od, bu sin ess veh icle expen se is ca lcu -la t ed by m u lt iplyin g t h e t ot a l bu sin ess m iles dr iven du r in g t h e t a x yea r by t h e st a n da r d bu sin ess m ilea ge r a t e in effect for t h e t a x yea r . Th e st a n da r d bu sin ess m ilea ge r a t e is pu blish ed a n n u a lly by t h e IRS. F or 2002, t h e r a t e is $0.365/m ile.
In a ddit ion , a pr opr iet or m a y dedu ct t h e cost of bu sin ess pa r k in g a n d t olls.
E XAMP LE 9: Sh a u n a , a self-em ployed in dividu a l, u ses t h e st a n da r d
Sh a u n a ’s 2002 ca r a n d t r u ck expen se dedu ct ion is ca lcu la t ed a s follows:
1. Mu lt iply t h e bu sin ess m iles dr iven by t h e st a n da r d bu sin ess m ilea ge r a t e in effect for t h e yea r :
5,500 bu sin ess m iles x $0.365/m ile = $2,008 2. Add t h e $150 of bu sin ess pa r k in g a n d t olls t o t h e a m ou n t ca lcu la t ed in St ep 1.
$150 + $2,008 = $2,158
Sh a u n a ’s 2002 ca r a n d t r u ck expen se dedu ct ion is $2,158.
R eq u i r em en t s for t h e s t a n d a r d m i l ea g e r a t e m et h od
In gen er a l, t h e st a n da r d m ilea ge r a t e m et h od m a y be u sed t o det er m in e t h e dedu ct ible cost s of oper a t in g a ca r , va n , pick u p t r u ck , or pa n el t r u ck t h a t is own ed or lea sed by t h e pr opr iet or a n d dr iven for bu sin ess pu r poses. You m a y u se t h e st a n da r d m ilea ge r a t e for 2002 if:
1. you lease t h e veh icle a n d a r e u sin g t h e st a n da r d m ilea ge r a t e for t h e en t ir e lea se per iod, or
2. you own t h e veh icle a n d u se(d) t h e st a n da r d m ilea ge r a t e for t h e fir st yea r you pla ced t h e veh icle in ser vice.
If you lea se a ca r a n d t h e lea se com m en ced befor e 1998, t h e “en t ir e lea se per iod” m ea n s t h e por t ion of t h e lea se per iod, in clu din g r en ewa ls, begin n in g on J a n u a r y 1, 1998. F or a ddit ion a l in for m a t ion , see Reven u e P r ocedu r e 97-58, IRB 1997-52 (Decem ber 29, 1997).
O t h er d ed u c t i b l e v eh i c l e exp en s es u n d er t h e s t a n d a r d m i l ea g e r a t e
in su r a n ce, a n d licen se a n d r egist r a t ion fees, or for lea se pa ym en t s or depr ecia t ion .
H owever , t h e st a n da r d m ilea ge r a t e does n ot in clu de a n a llowa n ce for per son a l pr oper t y t a xes on veh icles, or for in t er est expen se on veh icle loa n s. Th er efor e, a pr opr iet or m a y dedu ct t h e bu sin ess per cen t a ge of t h ese
expen ses in a ddit ion t o t h e st a n da r d m ilea ge r a t e a llowa n ce. Th e dedu ct ion for per son a l pr oper t y t a x is cla im ed on lin e 23, Ta xes a n d Licen ses, a n d t h e dedu ct ion for in t er est expen se is cla im ed on lin e 16(b), In t er est , ot h er . Th e dedu ct ion s for bu sin ess t a xes a n d in t er est a r e discu ssed in Sect ion s 10 a n d 11 of t h is cou r se, r espect ively.
E XAMP LE 10: Th e fa ct s a r e t h e sa m e a s E xa m ple 9. In a ddit ion ,
a ssu m e t h a t Sh a u n a dr ove h er ca r a t ot a l of 15,000 m iles du r in g 2002 a n d pa id t h e followin g expen ses:
1. $200 of st a t e per son a l pr oper t y t a x im posed on h er ca r ; a n d 2. $1,400 of in t er est expen se on a loa n t o fin a n ce t h e pu r ch a se of h er ca r .
Sh a u n a m a y dedu ct t h e bu sin ess per cen t a ge of t h e per son a l pr oper t y t a x a n d t h e in t er est expen se on h er Sch edu le C. Th e bu sin ess
per cen t a ge is ca lcu la t ed by dividin g t h e bu sin ess m iles dr iven , 5,500, by t h e t ot a l m iles dr iven , 15,000. Th u s, t h e bu sin ess per cen t a ge is 36.67% (5,500/15,000).
Th e dedu ct ion for t h e bu sin ess per cen t a ge of t h e per son a l pr oper t y t a xes equ a ls $73.34 ($200 x 0.3667). Th e $73.34 is dedu ct ed on lin e 23 a s pa r t of t h e bu sin ess t a xes a n d licen ses expen se.
Th e dedu ct ion for t h e bu sin ess per cen t a ge of t h e in t er est is $513.38 ($1,400 x 0.3667). Th e $513.38 is dedu ct ed on lin e 16(b) a s pa r t of t h e in t er est expen se. Th u s, Sh a u n a cla im s t h e followin g dedu ct ion s on h er Sch edu le C:
Ca r a n d t r u ck expen ses—lin e 10 $2,048 (fr om E xa m ple 9) In t er est , ot h er —lin e 16(b) $ 513
R ec or d k eep i n g
In or der t o cla im a ca r a n d t r u ck expen se dedu ct ion , a pr opr iet or m u st m a in t a in r ecor ds docu m en t in g t h e followin g:
• t h e t a x ba sis of t h e veh icle;
• t h e da t e t h e veh icle wa s pla ced in ser vice for bu sin ess pu r poses;
• t h e t ot a l m iles dr iven du r in g t h e t a x yea r ; a n d
• t h e t ot a l bu sin ess m iles dr iven du r in g t h e t a x yea r .
In a ddit ion , t h e followin g in for m a t ion m u st be pr ovided for ea ch bu sin ess u se of t h e veh icle du r in g t h e t a x yea r :
• t h e da t e;
• t h e t ot a l m iles dr iven ; a n d
• t h e bu sin ess pu r pose of t h e t r ip.
Th e IRS r ecom m en ds docu m en t in g t h is in for m a t ion in a m ilea ge log, bu sin ess dia r y, t r ip r epor t , or som e ot h er wr it t en r ecor d. Th e r ecor d sh ou ld a lso in clu de t h e da t es a n d a m ou n t s of bu sin ess pa r k in g a n d t olls.
U n der t h e st a n da r d m ilea ge r a t e m et h od, t h e pr opr iet or is n ot r equ ir ed t o docu m en t t h e a m ou n t of veh icle oper a t in g expen ses, su ch a s ga s, r epa ir s, a n d in su r a n ce. Docu m en t a t ion is r equ ir ed for bu sin ess pa r k in g a n d t olls.
A ctu al E xpen se M eth od
U n der t h e a ct u a l expen se m et h od, a pr opr iet or dedu ct s t h e a ct u a l cost s of oper a t in g a veh icle for bu sin ess pu r poses.
Th e dedu ct ion is ca lcu la t ed by m u lt iplyin g t h e bu sin ess u se per cen t a ge of t h e veh icle for t h e cu r r en t t a x yea r by t h e a ct u a l oper a t in g expen ses. Th ese expen ses in clu de:
• ga s a n d oil;
• in su r a n ce; a n d
• r egist r a t ion fees.2
In a ddit ion , bu sin ess pa r k in g a n d t olls a r e fu lly dedu ct ible.
E XAMP LE 11: Ba r t , a self-em ployed in dividu a l, dr ove h is ca r 6,000
bu sin ess m iles a n d 4,000 n on bu sin ess m iles du r in g t h e yea r . H e r epor t s t h e followin g a u t o expen ses:
Ga s a n d oil $1,500
Repa ir s a n d m a in t en a n ce 400
In su r a n ce 700
Veh icle r egist r a t ion fee 100
Tot a l $2,700
In a ddit ion , Ba r t pa id $250 in bu sin ess pa r k in g a n d t olls. H e u ses t h e a ct u a l expen se m et h od t o ca lcu la t e h is bu sin ess veh icle expen se dedu ct ion .
Ba r t ’s ca r a n d t r u ck expen se dedu ct ion is ca lcu la t ed a s follows: 1. Ca lcu la t e t h e bu sin ess u se per cen t a ge of t h e veh icle.
Ba r t ’s bu sin ess u se per cen t a ge of t h e veh icle is 60% (6,000 bu sin ess m iles/10,000 t ot a l m iles).
2. Mu lt iply t h e t ot a l oper a t in g expen ses by t h e bu sin ess u se per -cen t a ge t o det er m in e t h e bu sin ess oper a t in g expen ses.
$2,700 x 0.6 = $1,620.
Th e bu sin ess oper a t in g expen ses a r e $1,620.
3. Add t h e bu sin ess pa r k in g a n d t olls t o t h e a m ou n t ca lcu la t ed in St ep 2.
$250 + $1,620 = $1,870.
O t h er d ed u c t i b l e v eh i c l e exp en s es u n d er a c t u a l exp en s e m et h od
If t h e a ct u a l expen se m et h od is u sed, a n d t h e pr opr iet or own s t h e veh icle, t h e pr opr iet or dedu ct s veh icle depr ecia t ion on lin e 13, Depr ecia t ion a n d sect ion 179 expen se dedu ct ion . If t h e pr opr iet or lea ses t h e veh icle, n o depr ecia t ion is a llowed. Th e ca lcu la t ion of depr ecia t ion , in clu din g veh icle depr ecia t ion , is discu ssed in Sect ion 9 of t h is cou r se. (If t h e pr opr iet or lea ses t h e veh icle, t h e bu sin ess r en t expen se m a y be dedu ct ed on lin e 20(a ), Ren t or lea se, veh icles, m a ch in er y, a n d equ ipm en t , a s pr eviou sly discu ssed in Sect ion 5 of t h is cou r se.)
Th e bu sin ess per cen t a ge of per son a l pr oper t y t a x on veh icles a n d in t er est expen se on veh icle loa n s is a lso dedu ct ible on Sch edu le C. Th e ca lcu la t ion of t h e t a x a n d in t er est expen se dedu ct ion s is t h e sa m e for t h e st a n da r d
m ilea ge r a t e a n d t h e a ct u a l expen se m et h ods.
E XAMP LE 12: Th e fa ct s a r e t h e sa m e a s E xa m ple 11. In a ddit ion ,
a ssu m e t h a t Ba r t pa id t h e followin g:
St a t e a n d loca l per son a l pr oper t y t a x on h is veh icle $ 250 In t er est expen se on t h e veh icle loa n 1,200
Ba r t ’s bu sin ess u se per cen t a ge for t h e veh icle is 60%, a s ca lcu la t ed in E xa m ple 11. Th er efor e, Ba r t m a y dedu ct 60% of bot h t h e per son a l pr oper t y t a x a n d t h e in t er est expen se on Sch edu le C.
Th e dedu ct ion for t h e per son a l pr oper t y t a x is $150 ($250 x 0.6). Th e dedu ct ion is r epor t ed on lin e 23, Ta xes a n d licen ses.
Th e dedu ct ion for t h e in t er est expen se is $720 ($1,200 x 0.6). Th e dedu ct ion is r epor t ed on lin e 16(b), In t er est , ot h er .
R ec or d k eep i n g
Com preh en sive E xam ple
E r in , a self-em ployed ca t er er , own s a ca r t h a t sh e dr ives for bot h bu sin ess a n d per son a l u se. H er m ilea ge log r epor t s t h e followin g for 2002:
Bu sin ess m iles dr iven 7,000 Tot a l m iles dr iven 10,000
Du r in g 2002, E r in pa id t h e followin g a u t om obile expen ses:
Ga s a n d oil $600
In su r a n ce 700
Repa ir s a n d m a in t en a n ce 540
Veh icle r egist r a t ion fee 120
In t er est expen se—ca r loa n 800
Veh icle per son a l pr oper t y t a x 180
Bu sin ess pa r k in g a n d t olls 60
S t a n d a r d m i l ea g e r a t e m et h od
If E r in u ses t h e st a n da r d m ilea ge r a t e m et h od, h er 2002 ca r a n d t r u ck expen se dedu ct ion is ca lcu la t ed a s follows:
Bu sin ess m iles dr iven 7,000
St a n da r d m ilea ge r a t e x .365
Bu sin ess a u t o expen se $2,555
Bu sin ess pa r k in g a n d t olls + 60 Ca r a n d t r u ck expen se dedu ct ion $2,615
To su m m a r ize, E r in r epor t s t h e followin g on h er Sch edu le C: Ca r a n d t r u ck expen se—lin e 10 $2,615
In t er est , ot h er —lin e 16(b) 560
Ta xes a n d licen ses—lin e 23 126
Ac t u a l exp en s e m et h od
If E r in u ses t h e a ct u a l expen se m et h od, h er ca r a n d t r u ck expen se dedu ct ion is ca lcu la t ed a s follows:
A ctu al operatin g costs
Ga s a n d oil $ 600
In su r a n ce 700
Repa ir s a n d m a in t en a n ce 540
Veh icle r egist r a t ion fee 120
Tot a l $1,960
Bu sin ess u se per cen t a ge x 0.7
Bu sin ess oper a t in g expen ses $1,372
Bu sin ess pa r k in g a n d t olls + 60
Ca r a n d t r u ck expen se dedu ct ion $1,432
In a ddit ion , E r in m a y dedu ct t h e bu sin ess per cen t a ge of h er in t er est expen se a n d per son a l pr oper t y t a x. Th ese dedu ct ion s a r e t h e sa m e for bot h t h e st a n da r d m ilea ge r a t e a n d t h e a ct u a l expen se m et h od.
F in a lly, E r in m a y dedu ct veh icle depr ecia t ion , a s discu ssed in Sect ion 9. To su m m a r ize, E r in r epor t s t h e followin g on h er Sch edu le C:
Ca r a n d t r u ck expen se—lin e 10 $1,432
In t er est , ot h er —lin e 16(b) 560
Ta xes a n d licen ses—lin e 23 126
S ch ed u le C, Part IV ,
In form ation on Y ou r V eh icle
If ca r a n d t r u ck expen ses a r e dedu ct ed on lin e 10 of Sch edu le C, a pr opr iet or m a y be r equ ir ed t o pr ovide in for m a t ion a bou t t h e bu sin ess veh icle in P a r t IV of Sch edu le C. If F or m 4562, Depr ecia t ion a n d Am or t iza t ion , is filed for t h e bu sin ess, P a r t IV of Sch edu le C is n ot r equ ir ed. If F or m 4562 is n ot filed, P a r t IV m u st be com plet ed. F or m 4562 is discu ssed in Sect ion 9 of t h is cou r se. Refer t o P a r t IV of Sch edu le C, r epr odu ced in F igu r e 6-1 below a s you st u dy t h e lin e-by-lin e in st r u ct ion s for it s com plet ion .
L in e 43— Th is lin e r epor t s t h e da t e t h e veh icle wa s pla ced in ser vice for bu sin ess pu r poses. If t h e veh icle wa s con ver t ed fr om per son a l t o bu sin ess u se, en t er t h e da t e of con ver sion .
L in e 44— Th is lin e r epor t s t h e t ot a l bu sin ess, com m u t in g, a n d ot h er m ilea ge for t h e cu r r en t t a x yea r .
L in es 45-47— Th ese lin es a r e self-expla n a t or y.
FIGURE 6-1 Schedule C, Part IV
Information on Your Vehicle. Complete this part only if your are claiming car or truck expenses on line 10 and are not required to file Form 4562 for this business. See the instructions for line 13 on page C-4 to find out if you must file.
43 When did you place your vehicle in service for business purposes? (month, day, year) / / .
44 Of the total number of miles you drove your vehicle during 2002, enter the number of miles you used your vehicle for:
a Business b Commuting c Other
45 Do you (or your spouse) have another vehicle available for personal use? . . . Yes No
46 Was your vehicle available for personal use during off-duty hours? . . . Yes No
47a Do you have evidence to support your deduction? . . . . Yes No
b If “Yes,” is the evidence written? . . . . Yes No
N OTE S
1. IRS P u blica t ion 463, T ravel, E n tertain m en t, Gift & Car E xpen ses.
2. F or a com pr eh en sive list of veh icle oper a t in g expen ses, see IRS P u blica t ion 463, T ravel,
E n tertain m en t, Gift & Car E xpen ses.
3. F or a ddit ion a l in for m a t ion on r ecor dk eepin g r equ ir em en t s, see IRS P u blica t ion 463,
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CAR AN D TR U CK EXP EN S ES
Problem I.
Ma r k ea ch st a t em en t Tr u e or F a lse.
! The cost of commuting from home to your regular work location is a
n on dedu ct ible per son a l expen se. a . Tr u e b. F a lse
" The cost of parking at your regular business location is a deductible
bu sin ess expen se.
a . Tr u e b. F a lse
# If a proprietor owns a car used for business purposes, the proprietor may
ch a n ge fr om t h e st a n da r d m ilea ge r a t e m et h od t o t h e a ct u a l expen se m et h od.
a . Tr u e b. F a lse
$ The standard mileage rate method may be used for leased vehicles,
pr ovided t h e m et h od is u sed for t h e en t ir e lea se per iod. a . Tr u e b. F a lse
% In general, the cost of transportation between business locations is
dedu ct ible.
a . Tr u e b. F a lse
& In order to deduct vehicle expenses, a proprietor must maintain records,
su ch a s a m ilea ge log, docu m en t in g bu sin ess u se of t h e veh icle. a . Tr u e b. F a lse
' The business percentage of personal property tax on vehicles is deductible
( Under the standard mileage rate method, a deduction for vehicle
depr ecia t ion m a y be cla im ed on Sch edu le C. a . Tr u e b. F a lse
) Under the standard mileage rate method, a proprietor must maintain
det a iled r ecor ds su ppor t in g t h e da t e, a m ou n t , a n d t ype of veh icle oper a t in g expen ses.
a . Tr u e b. F a lse
! Interest expense on vehicle loans is strictly nondeductible on Schedule C.
a . Tr u e b. F a lse
Problem II.
Mu lt iple ch oice. Cir cle t h e cor r ect a n swer . U se th e follow in g in form ation for Qu estion s 1-3.
St u a r t , a self-em ployed a ccou n t a n t , r epor t s t h e followin g m ilea ge:
H om e t o a n d fr om St u a r t ’s office 3,000
H om e t o a n d fr om in -t own clien t offices 2,500 H om e t o a n d fr om a n ou t -of-t own bu sin ess sem in a r 600 H om e t o a n d fr om ou t -of-t own clien t offices 700
Ot h er n on bu sin ess m ilea ge 5,000
Tot a l m iles dr iven 11,800
St u a r t ’s r egu la r wor k loca t ion is a n office loca t ed in a down t own bu sin ess su it e. St u a r t pa id $100 for bu sin ess pa r k in g a n d t olls.
! Which of the following is personal mileage?
a . H om e t o a n d fr om St u a r t ’s office
b. H om e t o a n d fr om in -t own clien t offices
" If Stuart uses the standard mileage rate method, what is his 2002 car
a n d t r u ck expen se dedu ct ion ?
a . $3,540 b. $2,140 c. $1,487 d. $1,600
# What is Stuart’s business use percentage for the vehicle?
a . 32.20% b. 11.02% c. 57.63% d. 21.19%
$ If a proprietor uses the standard mileage rate method, he may deduct . . .
a . t h e bu sin ess per cen t a ge of in t er est expen se on a veh icle loa n . b. veh icle depr ecia t ion .
c. t h e bu sin ess per cen t a ge of veh icle in su r a n ce. d. t h e bu sin ess per cen t a ge of ga s a n d oil.
% If a proprietor uses the standard mileage rate method, . . .
a . sh e is n ot r equ ir ed t o docu m en t bu sin ess m iles dr iven du r in g t h e t a x yea r .
b. sh e is n ot r equ ir ed t o docu m en t t h e a ct u a l a m ou n t spen t on ga s a n d oil du r in g t h e t a x yea r .
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Problem I.
! True " False
Th e cost of pa r k in g a t you r r egu la r bu sin ess loca t ion is a n on dedu ct ible per son a l expen se.
# True $ True % True & True ' True ( False
Th e st a n da r d m ilea ge r a t e in clu des a n a llowa n ce for depr ecia t ion . Th er efor e, n o a ddit ion a l dedu ct ion is per m it t ed.
) False
Th ese r ecor ds a r e n ot r equ ir ed for t h e st a n da r d m ilea ge r a t e m et h od.
! False
Problem II.
! a
Com m u t in g is per son a l m ilea ge.
" c
St u a r t dr ove a t ot a l of 3,800 bu sin ess m iles (2,500 + 600 + 700). To ca lcu la t e h is dedu ct ion , St u a r t m u lt iplies h is bu sin ess m iles by t h e st a n da r d m ilea ge r a t e a n d a dds t h e bu sin ess pa r kin g a n d t olls. Th u s, t h e dedu ct ion is $1,487 [(3,800 m iles x $.365/m ile) + $100].
# a
Th e bu sin ess u se per cen t a ge is 32.20% (3,800 bu sin ess m iles/11,800 t ot a l m iles).
$ a
Th e st a n da r d m ilea ge r a t e in clu des a n a llowa n ce for veh icle depr ecia t ion a n d veh icle oper a t in g expen ses, su ch a s in su r a n ce, ga s, a n d oil. H owever , it does n ot in clu de a n a llowa n ce for in t er est expen se on veh icle loa n s.
% b
