Taxpayers have the option of reducing business travel expenses based on actual expenses or the standard mileage deduction. The IRS audit of this deduction to keep up with rising gas prices, inflation and other factors that drive up the cost of owning and operating a motor vehicle.
The big news is that the IRS increased the standard mileage rates for 2013 to 56.5 cents per mile, up from 55.5 cents per mile in 2012, a year the department also increased mileage rate deduction.
The IRS also increased mileage rate deduction for moving and medical purposes, also up 1 percent, to 24 cents per mile. The rate for charitable services stays the same, at 14 cents per mile.
Take deductions for the business traveler can get complicated, but for most small business owners, it is worth the hassle. Travel deductions can add up to thousands of dollars in tax savings each year. But there are some things you should know so you can work with the auditor to make the best decisions when it comes to deducting transport costs
Standard Mileage Rates vs actual cost deductions :.
When you reduce transportation expenses by the standard mileage deduction, you can not draw Vehicle Service charges, gas, taxes, insurance, vehicle registration fees or the cost of the vehicle itself, either in whole or weakened. You also can not reduce the cost of payments on the rental car.
You can reduce parking fees and duties (but not tickets or fines), the interest rate on car loan and property taxes paid when you bought the car, which are sometimes the car registration
No Turning Back: .
If you do not use the standard mileage rate for the first year to own and use a special car for business, you can not use this method for the car. However, you can switch to the actual cost in the coming years, or switch back and forth between the two as long as you began using the standard mileage rate.
If you rent a car, however, you must use the standard mileage rate for the entire period of the lease if you use it in the first year.
What subtraction method should you use?
It is certainly easier to track mileage only, rather than meticulously traced all the costs associated with owning or renting a car. However, in some cases can reduce your tax liability to use the actual deduction method.
accurate accounting records, either method of transport tax deductions will be easy for certified tax accountant to figure so that you can reduce your tax liability and put that money back into growing your business.