Auto and travel (business) expenses 1/31/15
You must determine the percentage of business vehicle use in order to take a business deduction for the use of your car. No deduction is allowed if the vehicle is used solely for personal use, including commuting to and from work. Deductible car use can include:
- traveling from one workplace to another;
- making business trips to visit customers;
- attending business meetings away from your regular workplace: and
- traveling to temporary workplaces.
To claim the deduction, keep contemporaneous (i.e., made at the same time as the use) complete and accurate mileage records for each business use of your car, including date, where traveled, who you met with, and business purpose. If you cannot produce a clear record, the IRS may disallow the deduction.
2 methods are available for claiming business car expenses:
- Actual Expenses: Add all of your car operating expenses for the year, including: gas, oil, tires, repairs, license fees, lease payments, registration fees, garage rental, insurance, and depreciation. Multiply the total car operating expenses by the percentage of business usage to determine your deductible expense. Business-related parking and road tolls are fully deductible expenses that do not have to be reduced by the percentage of business usage.
- Standard Mileage Rate: rates will be listed on http://www.IRS.gov when they become available. The 2015 standard Mileage Rate rates for the use of a car (including vans, pickups, or panel trucks):
- 57.5 cents per mile for business miles driven;
- 23 cents per mile driven for medical or moving purposes; and
- 14 cents per mile driven in service of charitable organizations.
Employer provided vehicles
If our employer provides a vehicle for your use (and personal use is permitted), you must either:
- pay your employer for your personal use, or
- your employer must include the value of that use in your income.
For vehicles up to a specified value (set by law and adjusted annually), you may use the standard mileage rate to determine the value of the personal use. If the vehicle cost exceeds that amount, you must use the "applicable lease rate" from an IRS provided chart, roughly 25% of the initial cost annually multiplied by the per cent of personal use.
Employer reimbursement for auto use
If your employer reimburses you for use of your personal car in our employer's business, and if you "adequately substantiate" to your employer for the amount of use being reimbursed (supply your employer with a record of: date, where traveled, who you met with, and business purpose), you do not have to include the reimbursement in income.
if you do not adequately substantiate for the amount reimbursed to you, your employer must include the payment in reporting your income (on our W-2), and you must deduct the expense on your personal income tax return. In that case, or if the reimbursement is less than the expense and you choose to deduct the excess expense, you must deduct the expenses on Schedule A, itemized deductions, as a "miscellaneous itemized expense", and be prepared to substantiate the expenses to the IRS (e.g., in an audit). Deduction on Schedule A is usually disadvantageous as you are only allowed to deduct miscellaneous itemized expenses exceeding 2% of your adjusted gross income (AGI), and itemized expenses are reduced if income exceeds an annually adjusted amount. You also may not be able to benefit if you do not normally file a Schedule A.
“Ordinary and necessary” travel expenses incurred while traveling away from home for the primary purpose of business are deductible. Keep all receipts and relevant documentation to substantiate:
- where you went
- why you went
- how long you stayed, and
- how much you spent.
If your travel includes both business and personal travel, keep records showing how much is related to business. Keep the following:
Lodging (hotel, etc.) records should show the travel location, duration of your stay, costs, and expenses incurred. Keep records for cleaning and laundry, telephone charges, tips, and other charges not shown separately.
These include airplane, train or bus ticket stubs, travel agency receipts, rental car or taxi receipts, parking, tolls, tips, etc., showing the amounts, dates and destinations.
Generally, you must keep a log of your meal expenses and save receipts for amounts of $75 or more. If you do not want to keep track of the actual costs of your meals, you may qualify to use the standard meal allowance. Whether you use the standard meal allowance or actual expenses, you may only claim a deduction for 50 percent of the unreimbursed cost of your meals while you are traveling.