RECONSTRUCTING
AUTO MILEAGE - DC
By Sharon Riley
It's a
real pain to write down your odometer reading every time you move
your car, isn't it? Well, you don't have to do that. In order
to deduct percentage of actual expenses <OR> the standard
mileage you must have two figures:
First: You must have the TOTAL NUMBER OF MILES DRIVEN DURING THE
ENTIRE YEAR for each car. It is important to write down your Odometer
reading on every car owned by you, including the teen's cars,
EVERY JANUARY 1. This gives you your TOTAL MILES.
If you
haven't done that, put your heads together with your mechanic
and make a good, solid guestimate. For instance, if you have owned
the car 24 months and you have put 23,862 miles on it -> round
that off and figure 1000 miles per month x 12 months = 12,000
miles per year.
Second: You must have the TOTAL NUMBER OF BUSINESS MILES DRIVEN
DURING THE ENTIRE YEAR for each car.
How do
we get this???? Simple. You know you always drive YOUR car to
grocery store #1. You know its 5 miles ROUND TRIP to your grocery
store #1. You have 20 receipts from grocery store #1. 5 miles
x 20 receipts = 100 miles to grocery store #1. Count that mileage
on your car.
You know
your husband always drives HIS car to the Home Supply Store. Do
the same process with those receipts and count them on HIS car.
You always
send your teenaged daughter to the convenience store. Count those
miles on HER car. (You own it don't you? It's your car, so it's
your mileage.)
For the
Bank, go to your statements and count the number of deposits,
instead of receipts. You sent a car to the bank to deposit your
clients' checks, didn't you? I know I don't trust my deposits
to the Postal Service. Put that mileage on whichever car goes
to the bank.
You now
have:
Car #1
is 2,500 total miles and 2,000 business miles.
2,000/2,500 = .8000 = 80% business
Car #2
is 12,000 total miles and 2,000 business miles.
2,000/12,000 = .16666 = 16.67% business
Car #3
is 9,000 total miles and 1000 business miles.
1,000/9,000 = .1111 = 11.11% business
What expenses
can you deduct?
Gas &
Oil, Inspection, INSURANCE, LOAN INTEREST, repairs, maintenance,
tires, tag, a new radio, a new paint job, every other DIME spent
on each car you own, PLUS depreciation.
Which to deduct, mileage or expenses???? You deduct which ever
gives you the more desirable result. If car #1's actual expenses
are $1000 then $1000 x 80% = $800 deduction. But, 2,000 miles
x 34.5 cents is $690. The car with the loan on it should be the
primary daycare car as that makes the interest deductible. The
business percentage of the loan interest is deductible whichever
method is used.
I generally
deduct the percentage of actual expenses on the primary DC car
and standard mileage on the others. That usually produces the
best deduction.
Depreciation
is based on COST *not* purchase price, which is another post.
AND If you decide to deduct actual expenses, you should depreciate
the car using STRAIGHT LINE DEPRECIATION which is also another
post.
Sharon Riley
NELSON
& RILEY
http://www.nelsonandriley.biz
813-886-9567 FAX 813-882-9454