Building a business usually comes with a high responsibility, especially if you know anything about building a business. To get the benefits of building a business, you need to understand how the laws and taxes work for business person than employee. Both of them have different rules. If you’re a business owner, you need to play with business rules, not the one that you use when you’re still an employee.
One of the knowledge that you should learn regarding business is how to use the benefits of taxes in your business.
If you’re trying to figure out how you could increase your business deductions, take a look at your driveway. You need to know that your vehicle is deductible when you use it for business. So, when you drive your car and use it 100% for business, the expenses will web deductible. But what if you use it for business less than 100%? It’s not a big problem. Many small businesses do this too, and they could reduce the expense record. Don’t understand how it works? It’s simple. When you use 75% of your car for business, you’ll deduct 75% of your vehicle expenses.
There are two ways to report your car expenses, the actual expense and mileage method.
When you use the actual expense method, you need to keeping track of the expenses, such as oil, gasoline, maintenance, repairs, registration, license, wash, wax, supplies, equipments, taxes, and so on. You need to add up all of the deductions and then multiply it by the total of your business percentage, which is determined through dividing the business miles by total miles you drove.
When you use the mileage method, you don’t have to keep tracks of all deductions. You’re only need to make notes of business miles driven. This will be multiplied by the mileage standard rate that published by IRS. The mileage rate will be different every year, usually ranging from 36-48 cents per mile. This amount could be bigger or smaller next year.
Also, when you use the mileage method, you could see that there are also other deductible stuffs such as taxes and interests. If you’re confused to find out which method that you should use, you could run both of them, and choose the higher deductions instead. However, you need to be careful in following the “switching” rules. You could easily switch from mileage method to actual method. But, you can’t do that easily if you switch from the actual method to the mileage method.
If you want to keep the record simple, go with the mileage method because you don’t need to keep any receipts that you need for the actual method. Even if the mileage method doesn’t need any extensive record keeping, you should keep the log of it just for the save way. You could keep the log daily, weekly, or monthly. Pick the one that less stressful for you.
No matter which method that you choose, you’ll get the business tax deductions. The difference of both methods only lay on how big the deductions will be.