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2015 Small Business Tax Tip: Auto Expense


Courtesy of Guest Blogger, Stanley J. Bushner, Shareholder, Buckno Lisicky & Company CPA's
CLICK HERE to learn more about Buckno, Lisicky & Company CPA's

Auto expense is a common expense of a business.   Assuming the business owns or is leasing the auto, the automatic mileage method or actual cost method may be used in calculating auto expense.   If the vehicle is used both for business and personal, arriving at a business usage is a percentage of business miles to total miles (commuting is personal).   If you have a home office, travel from your home to various work locations is considered business.

The automatic mileage method is calculated by multiplying your business miles by 57.5 cent per mile in 2015.   You are allowed to add parking fees and tolls to get to the total auto expense.  This method is an easy way to calculate your auto expense.

The actual cost method is arrived at by totaling all auto expenses (including depreciation) and multiplying the total by the business percentage.  The actual cost method needs greater record keeping and detail.  You can switch methods each year, subject to certain exceptions.

Interest paid on car loans are not deductible for an employee (exception if auto was financed with home equity loan) but may be deductible if self-employed.  Sales tax paid on a purchase of a business vehicle most be added to the auto’s cost and subsequently depreciation.   Parking and speeding tickets are not deductible under either method.

So when filing your tax returns, both methods should be calculated to see which one gives you the greater tax benefit.


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