Claiming Vehicle Expenses - The Standard Mileage Method
Vehicle expenses can be a major business deduction for family child care providers - and are often audited by the IRS. Therefore, it pays to know what you can deduct and how to keep accurate records.
You can count a trip as a business trip if the "primary" purpose of the trip is business. Primary purpose means that more than 50% of the reason for the trip is business. This includes children's field trips, trips to the bank to deposit parent fees, and trips to trainings. A trip to the grocery could be claimed as a business trip if more than 50% of the food purchased was for the business.
You must have an "adequate record" to show that you made a business trip: calendar notations, receipts, cancelled checks, credit or debit card statements, field trip permission forms, training certificates, mileage log, photographs, and other written records. You may want to review these records monthly to make sure you've identified all your business trips.
You are not required to keep a mileage log of odometer readings. You do want to record the odometer reading of your vehicle at the beginning and end of each year.
There are two ways to claim vehicle expenses: the standard mileage method or the actual expenses method.
Standard Mileage Method
If you use the standard mileage method you can claim the following expenses for your vehicle:1) Business mileage rate.
The business mileage rate for 2021 is $.56 per mile.2) Parking/toll/ferry expenses3) The business portion of car loan interest and personal property tax.
Personal property tax is a tax paid at the time you renew your vehicle registration. It’s not the tax you pay when buying a vehicle. Look on your annual vehicle registration bill to see if there is a tax. You can only deduct the tax, not the registration fee. Not all states have a personal property tax.
To determine the business portion, divide the number of business miles you drove in the year by the total number of miles you drove. For example, 2,000 business miles divided by 10,000 total miles = 20% business. If your car loan interest was $500 for the year, you could deduct $100 ($500 x 20%). You cannot deduct any other vehicle expenses when using the standard mileage method. This includes car insurance, gas, oil, repairs, and so on. The standard mileage rate is designed to cover these expenses.
See also: Claiming Vehicle Expenses – The Actual Expenses Method
Tom Copeland – www.tomcopelandblog.comImage credit: https://pixabay.com/vectors/van-vintage-cartoon-vehicle-2492912/
For more information see my book Family Child Care Record Keeping Guide.
