Driving for Business in 2011
by Barbara Weltman
If, like most small business owners, you use your personal car for business, be sure to follow tax rules so you’ll get the biggest write-off you’re entitled to.
There are two ways in which to figure the deduction of your business driving costs: track the actual expenses for use of your car on business or rely on a standard mileage rate fixed annually by the IRS.
Standard mileage rate
The standard mileage rate is fixed each year by the IRS and relieves you of the chore of keeping receipts for car-related expenses. This rate takes the place of deducting the cost of gasoline, oil, repairs, lease payments (if you lease), depreciation (if you own), and other car-related expenses.
The standard mileage rate for 2011 has been set by the IRS at 51¢ per mile. Thus, if you drive 20,000 miles for business in 2011, your deduction for business use of your car will be $10,200.
If the cost of gasoline rises substantially during 2011, the IRS might issue a second rate for a portion of the year, as it did in 2008. You may recall that in 2008, there was one rate for the first half of the year and another rate for the second half of the year.
In order to maximize your deduction for driving, you’ll need to retain receipts for car-related expenses so that, when you file your return, you can opt to use the standard mileage rate or the actual expense method.
Note: Whether you deduct driving costs using the standard mileage rate or actual expense method, you can also separately deduct parking fees and tolls.
Regardless of which method you opt to use, be sure to maintain a record of your business driving. The record should be made at the time of each business trip and indicate the date of each trip, the odometer reading, the purpose of the trip, and the destination. Start the new year off right by recording your odometer reading and maintaining records faithfully throughout the year.
To read the rest of Ms. Weltman’s article, which includes how to keep a record for tax purposes and what is business driving, please go to http://bit.ly/eKoAIF.