Standard Mileage Rate vs Actual Expenses (Section 179 VEHICLE TAX DEDUCTIONS)
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- เผยแพร่เมื่อ 30 ก.ค. 2024
- Standard Mileage Rate vs Actual Expenses (VEHICLE TAX DEDUCTIONS - vehicle tax deduction for small business). {Hey, I recently started a Financial Vlog - would like to invite you to follow along if interested: • Escape the Rat Race & ... - Kyle}
So, which one should you take?...the standard mileage deduction OR the Actual Expenses you incur operating your vehicle for business? In this video I discuss vehicle tax deductions & which is the most appropriate method of accounting / write-offs for you if you are writing off a vehicle for business. In a previous video I went through several of the specifics of the IRS Section 179 Tax Deductions for vehicles...and what we did not go over in that video we are going over in this one.
When purchasing a vehicle for your business you have to decide in the FIRST year of service if you will use the Actual Expense accounting method OR the Standard Mileage Rate accounting method for your vehicle tax deduction...so we go over some specific examples of when it makes sense to use the Actual Expense method and Standard Mileage Rate Deduction.
Section 179 Deduction (for vehicle purchases): • Section 179 Deduction ...
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Timestamps / Chapters
0:00 - Intro
0:34 - Section 179
1:52 - Standard vs Actual
2:58 - Which one to choose
3:43 - Scenario #1 (Actual)
5:10 - Scenario #2 (Standard)
6:36 - Bonus Tips
ABOUT ME 👇
I've been involved in people's financial decisions for 15+ years (7 yrs Real Estate experience & 8+ yrs as a former Financial Advisor)...I now bring the financial successes, mistakes, failures, and best financial habits/tips to you through these videos.
My mission is to bring Financial Awareness to the forefront of your daily decisions so you can: improve your quality of life, increase your net worth, and grow upon your financial literacy. My videos are a reflection of my real-world experience as a real estate investor, stock market investor, student of finance, entrepreneur, and of course...my experience as a Former Financial Advisor.
This channel allows me to share my passion for personal finance, stock market investing, real estate investing, and entrepreneurship. I produce content that I would want to watch, and because of that, I give 100% effort in every video that I make. I also believe in complete transparency and open communication with my audience.
Subscribe if you are interested in:
#TaxWriteOffs
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DISCLAIMER: I am not a financial adviser or a certified public accountant. These videos are for educational purposes only. Investing of any kind involves risk. While it is possible to minimize risk, your investments are solely your responsibility. It is imperative that you conduct your own research. I am merely sharing my opinion with no guarantee of gains or losses on investments.
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{Hey, I recently started a Financial Vlog - would like to invite you to follow along if interested: th-cam.com/video/YnZrh9YwNQo/w-d-xo.html - Kyle}
My FAVORITE Vehicle Deduction! (Pssst, it isn’t Section 179): th-cam.com/video/9Hn3ITdXNv0/w-d-xo.html
MORE Self Employed Tax Return TIPS: th-cam.com/video/TOpklhcGJ1o/w-d-xo.html
Section 179 Vehicle Tax Deduction: th-cam.com/video/KAaSKCy-zDM/w-d-xo.html
Best summarizes and straight forward. Thx
AMAZING VIDEO! Thank you for the clear breakdown. I watched a couple other videos before this and I had more questions than answers. This video was a life/money saver for sure!
@ConstantlyVariedFitness - Hey, thanks man! Glad it was helpful for you. If there are other finance-related videos you'd be interested in watching please let me know and I'll work it into my content calendar...several of my subscribers were asking for more 'self employment' videos and that was the inspiration behind this one and others as well. I imagine you're busy - so I appreciate you taking the time to watch this video - whenever you have time there might be more within my content library that could be of interest to you. Again - appreciate you, boss! Cheers!
I found your channel a couple days ago and it is literally gold for business owners. Thank you
@David Galvan - Wow! Thanks for sharing your thoughts, David...really kind of you to share. Yeah, business owners and the self-employed have like 27 hats y’all have to wear on any given day and I highly respect what you guys do to help our economy function. So many Financial Advisors (my previous line of work) are so “salesy” clambering for your business that I simply wanted to share my thoughts in a format that help you get the information you need without all the bs and on a platform that you can consume on demand on your own schedule (TH-cam). There are a few vids from last summer where I share my story a little more. Really appreciate your comment. Thanks boss! Cheers!
Very very informative video liked and subbed!
@Just a guy without hair - Thanks! Appreciate you. Great name BTW 😂
Really great video! Well done!
Joshua Martinez - Thanks boss man!
fantastic in helping me get my handyman biz off the ground. ty!
Very good video! Thank you for the information!
@Monique Martinez - Thank you for that kind feedback. Glad you got some value. Have you already chosen one over the other (standard vs actual) or are you researching before making a vehicle purchase? Appreciate you taking the time to watch! Cheers!
Thank you so much I am getting into rideshare services and this video explained the process very easy
Ok so, it’s been 3 months…how’s it going, Andres? You making money then calculating all your write offs/deductions and realizing that all this money you’re earning can be offset to reduce your taxes? Let me know man! I’m curious
favorite channel
@SoulXtentions 3D Printing - Thank you for making my day! 😃
Love your "deco design." I'm a construction sub contractor with an interior design degree, very cool style.
@Michael DeAmicis - Hey thank you! Yeah, I wanted something a little different in the background and when I saw the raw metal pipes with wood shelf I was like, yup...that’s what I want. My in-laws have been General Contractors since the 80’s so I have an appreciation for your line of work...thanks for taking the time to check out the video! Hope a few of my other ones are a valuable use of your time as well. Cheers boss!
Greatly appreciate the video!
@AMG Construction and Landscaping - Thank you so much for your feedback! I just filmed a follow up video to this one and am planning on posting it soon. Appreciate you...cheers!
600 miles a week for my job roughly and I'm 1099 so definitely helps! Thanks
@Tyler Eppens - Safe travels boss man! Glad you got some additional insight into this topic. Thanks for checking out the video / channel. Cheers!
Excelente thank you
Oh, how I wish I had taken accounting courses in college. Thank you for this breakdown!!
Josh Is On A Mission: FIRE & Debt - Hey man, we live and we learn...thanks for the good vibes! With how well you manage your investments & expenses combined with your profession I'd think the Standard Mileage would be the way to go for you. Do you track your mileage?
@@Financial_Awareness I didn't even know I had options haha I started to track my mileage this year and keep the gas receipts (not sure if that's even helpful--but I do)
@@JoshIsOnAMission - You don’t need to track gas receipts if you’re taking the standard mileage deduction...just tracking your miles that are business related. If you drive a somewhat modest/nice car that is low on cost/maintenance then you’ll most benefit from the standard mileage rate each year. I’ve had my vehicle paid off for 3+ years and take decent preventative care/maintenance of it...so for people like that you’ll get a way better write-off for using the mileage calculation. Biz owners that make $350k+ (as an example) that buy a $65k vehicle and drive very little will more benefit from depreciating that vehicle all the way down in year one (via ‘actual expense’ accounting method)
@@Financial_Awareness Thank you for letting me know! Def don't make 350k ...yet ;) Thanks for giving me the 411 boss!
@@JoshIsOnAMission Key word 'yet'....stay the path, man! Focus on the process and the results will follow...like a dog on a leash.
Great info. Thanks! Very simplified and helpful. Also, why not set up a home office even if only for administrative purposes and then you can deduct that drive from home to office or to wherever you go for business when you leave home?
@Dionne Childs - Hi there! Thanks for taking the time to check out this video - appreciate you!
Based on how I understand the mileage deduction, you are not allowed to calculate the miles driven from your primary home to your office when adding up your “business miles driven.” On the other hand, IF you have no actual office and are setting up a home office to work out of, then yes, the mileage you drive “from home” to places around town then those miles driven can be calculated. Does that make sense?
Hope that helps. Thanks! Cheers boss lady!
Thanks
@donna Gresham - My pleasure! Hey, if you have a spare moment I did a follow up video to this one...posted it just the other day and it is similar to this video. At any rate, appreciate you taking the time to watch this video. Cheers!
I'm an accountant that also does Doordash. I was wondering where you got your information from that you can deduct those other expenses for the standard mileage rate.
Publication 463:
"If you use the standard mileage rate for
a year, you can’t deduct your actual car expenses for that year. You can’t deduct depreciation, lease payments, maintenance and repairs, gasoline (including gasoline taxes), oil, insurance, or vehicle registration fees."
@Austin Mooney - Hey Austin! Appreciate you taking time to watch the video and comment. Thought I included the link to my source in the video description, but upon looking further just now I see that I haven't. My bad. Here you go: www.thebalancesmb.com/standard-mileage-rate-vs-actual-expenses-2125242 ...scroll down in that article and you'll see where I found the info for this particular section of the video. I think you are correct though regarding those other expenses not being able to be used because that article is 3 years old and now that I'm reflecting back on my prep for this video I may not have realized the old-age of that source. Additionally, I usually try to use IRS website sources directly and not 3rd party articles...for future videos I'll make a better effort to vet my info before publishing a video.
I'm going to edit out those 10-15 seconds of the vid so this doesn't confuse and mislead future viewers and I greatly appreciate you bringing this to my attention...THANK YOU for holding me accountable! Cheers, boss!
@@Financial_Awareness Yessir. As a tax accountant, I appreciate anyone who tries to make it easier for others who don't understand IRS rules. If I can be of any help in the future let me know.
@@Financial_Awareness You took ownership of a potential error? Edited the video for future viewers like myself? And replied so thoroughly to Austin Mooney's question?! This is a refreshing level of quality. You got another sub K.Scholl. Thank you for doing what you do!
@Christopher Bates - Yes sir, that is correct. Appreciate you noticing. 🤝
Fair warning, I am not able to upload as often as I used to & I don’t really ‘do whatever the TH-cam algo says I should do’ if you know what I mean. Lol. So the “financial awareness” vids can be all over the place from tax deductions to penny stocks to budgeting. Kinda all over the place, but algo would tell me to focus on one area/niche and stick to it, but that’s just not my style (to only focus on dividend stock investing for example). Anyway, thanks man…happy to have you here and hope you find a financial nuggets or two within the videos. Cheers!
Great video in helping me understand which route to take. Question - I'm planning to rent cars in Turo. Can I claim the standard mileage rate even though it is being driven by an Uber Driver who will also most likely claim those mileage for their own tax purposes?
@Vanessa G - Hey, thanks for checking out a few of the videos on my channel...appreciate you, boss lady! It is my understanding that most Uber / Lyft drivers own their own vehicles...mostly in their personal name. So, they would be able to generate the tax write off against their revenue from taxiing people around. However, if I understand the way Turo works...YOU actually own the cars and other people simply rent them from you instead of renting from places like Hertz or Enterprise...do I have that correct? If so, then I'm confused...you would rent them out through Turo specifically to Uber drivers to drive other people around??? I'm not sure I fully understand what you're attempting to do here.
That said, if YOU own the vehicle then only you can take the depreciation on the vehicle. If you own the vehicles and allow other people to use them for a taxi service then that driver does not have an ownership interest in the vehicle itself and cannot take any deductions against the vehicle's depreciation. Please let me know if I misunderstood your question. Thanks! Cheers!
Interesting video.. I'm still not buying a car anytime soon lol
Personal Finance - Thank you! Glad you found it interesting. Yeah, don’t buy a vehicle just for some sort of write off...buy when it makes sense for your business and the accounting will work itself out. Appreciate you! 👍🏻👍🏻
What do you do if you use an Electric Car? Do you use the standard mileage? Or should you use Section 179?
@Jay the Ram - Great question! Despite the state/federal tax benefits you may get from this purchase, my thoughts still come back to whether you'll get more value from all the miles you plan to put on this vehicle compared to the actual expenses & purchase write off (including bonus depreciation). So, as I shared in the video, if you plan to drive very little (under 12,000 miles per year) then I think the Section 179 would likely be a better value...conversely, if you plan on driving quite a bit AND owning this vehicle for 5-6+ years then it is quite possible the mileage write off could be better...just depends on your situation I think. Hope that is helpful. Appreciate you, boss! Cheers!
a hybrid or high mpg car i take miles is best you may lose money on paper
but really be making money
nice content. 2 questions
1. do i need to track miles if I use the vehicle only for business purposes? ( can i just take milage difference between january 1 and december 31st?)
2. can I use standard mileage if I have 5 cars ? I read somewhere that max is 4
1-the “cya” answer is still track. Lol. I’ve heard of some that do what you do and I’ve been told snapping a picture of the odometer is helpful…but yeah, tracking will ensure your documentation is air tight.
2- I’m sure I could google what the max is, but it wouldn’t surprise me if they did have a max before you were considered a “fleet”. 🤷🏼♂️
Just found your channel today! Super informative. I read a lot of the comments to see if you answered this already. But didn’t I didn’t get the answer that I was quite looking for so I hope you can help.
I will be starting self employment next week. Working from home and driving to my clients to offer services. I will be using quickbook to keep track of my miles. The mileage used to see clients is less than 25,000 a year and is between 8-14,000 a year to see my clients. Base off the examples you gave, using standard will still be my best option outside of not using 25,000 miles.
If I’m using my old car which is my only car, can I still write off insurance and car notes? Or is it in my best interest to just stick to only the mileage usage expense?
Thank you for the kind words! Appreciate you taking the time to invest in yourself by watching videos like this one. Awesome dude! Keep that up and your confidence will continue to compound over time.
Congrats on starting your self employment soon…such an exciting and nervous time I’m sure. Lol. To answer your question, no sir, you cannot write off those additional items (expenses) if you’re taking the standard mileage deduction. It is one or the other. Sounds like you’ll be all set with mileage though.
Keep it up and focus on what you can control, but you’re now going to be the most efficient worker bee than ever before…because now you’re self employed & more in control…which usually means more work. Lol.
@@Financial_Awareness I really appreciate it and thank you for responding to a video you did over 2 years ago lol. That’s dope! Stay bless!
Can you get section 179 for new vehicle purchase and also get standard millage method. ?
I work as a mechanic in a truck. The truck is parked in my yard at home. My job site varies day to day so I wonder if I’m good to write of the miles from home to the customers location
@Youngrevival 97 - Double check this with a CPA, but I 100% believe you can...because you're not driving to / from a dedicated office...as you said you're job sites vary each day wherever your customers' vehicles are located. So, I say yes, track all those miles and write them all off - fo sho.
Cheers, boss!
You only use 2 scenarios (High Price & Low Miles vs High Miles & Low Cost) making it difficult to know what works best. I have a Truck that is a High Cost and I drive Relatively High Miles. I have tons of Gas and High repair costs. Your video doesn't use that scenario/example to determine if filing with actual expenses would be best. Also I'm curious is it matters if the vehicle is personally owned or owned by the company. Also does it matter if you are and LLC or S-Corp, etc. Thank you, any info would be helpful
What if i plan to drive alott. With a high priced vehicle?? I dont understand why you say more miles is better for standard method? Is it not the same deduction when i write off gas receipts, vs standard method of tracking mileage. Im trying to find what method i should use. I figured the expense method until you said high miles is better for standard. What am i missing?
Thank you!
If I use Standard Mileage to lease my car to my business, would it be ok to treat this as monthly rental payments from the business to me?
@blackezi3 - Not sure I fully understand your question. Check with a CPA.
What if you already own your car?
So I'm doing a business paper, but I have a few questions. To put it into context, I'm writing about if a maintenance company should invest in getting company cars to wrap as a form of advertising. So if you plan to wrap a vehicle, you cant use the standard mileage method at all? Or you can still have personal miles in the car and use the standard mileage method, but if you can make a reason for going to a particular area, you can count the miles as business miles outside of the typical business miles (being going to and from houses that maintenance or appraisals were done on). Then, the company I'm looking at has two other employees. Is the owner is allowed to make three purchases and do the same thing to all vehicles (being wrapping them) and then deducting each car, but have each person record their miles? Or is that more of something separate (in buying the car for themselves) they would have to do because the business is an LLC? Also, in this case, if we looked at buying a new truck (2021) that has about a $40,000 price, qualifies for the exemptions of section 179 code, and is going to be kept for an extended time and be driven a lot, being more for business than personal (Estimating about 90% business and then 10% personal). Do you think standard or actual would be more effective (this relating to just the car that the owner is going to own)? Then, the same question but the proportion of personal to business is about 75% business to 25% personal.
@WorldWideGaming - Lots to unpack here...I'll do my best...
- The cost to wrap the vehicles is a not a vehicle deduction for mileage or actual expense...it would be a marketing expense and would be in addition to any vehicle deduction (whether you chose actual or standard).
- If you spend money to wrap a vehicle you can still choose actual vehicle expenses OR standard mileage deduction.
- It is my understanding that in order to be able to use section 179 and actual expense method of deduction/depreciation that you have to use the vehicle for at least 50% business...with the standard mileage rate method of vehicle deduction I did not see any specific percentage of minimum miles driven for business use.
- I intentionally found clients all over the country in places where I enjoy visiting...thus making my commute/travel to/from those clients/cities a deductible expense through my business....so yeah...the more excuses you can come up with 'why' you're driving/traveling to a particular area the more you'll be able to deduct. My buddy's dad owned a couple restaurants in the mid-west and we would always laugh when he bought a round because he always would call it, "market research" - which might not fly for a lot of businesses, but because he owned a restaurant / bar it seems in line with his area of expertise.
- You question about employees driving for business purpose...yes, the owner can purchase those other vehicles and would be able to select standard mileage OR actual expense method of accounting with each vehicle...if the employees purchase the vehicle themselves then it isn't a company vehicle - it's their own vehicle...and if you reimburse them for their miles driven then they will not be able to deduct any of those against their income.
- Your last question for the 2021 vehicle you're considering...completely up to you...just run a few numbers based on how many miles you plan to put on the truck each year and see what will come out with the better result because I don't know what you mean when you say 'driven a lot' - that could be 15,000 miles or it could mean 30,000+ miles....if you plan on driving a brand new $40,000 vehicle "a lot" then in my opinion I think it's a waste of business capital resources to spend that much on an asset that will be driven into the ground and would encourage you to find a 2019 or 2020 similar vehicle that is significantly less than $40k. Up to you though boss.
Long question - long answer....hope that it's helpful. Good luck with your business paper....let me know if you get an "A" on it. Cheers, boss! Appreciate you.
@@Financial_Awareness Yes, it was constructive! Thank you very much. It helped me clear up a few things and choose what direction I will take my paper in. Thank you for everything you do to make videos to help people out and get them informed. I'll make sure to let you know how I do on the paper, and thank you for taking the time to respond to my extensive comment. Have a good one!
So, as a Turo host. If I put three vehicles for rent throughout the year and accrue a lot of miles. I can still claim the standard mileage method? It may also be best to use the 179 method and sell the vehicles the following year and purchase another three.
@Felipe Machado - Those are some great questions, Felipe! I'd suggest running them by a CPA. If you do decide to sell the vehicles the following year after writing them down - just be sure to familiarize yourself with "depreciation recapture" as you potentially would owe some taxes if you sell the vehicle for any amount above your basis...and if you write off the full prices then your basis is zero...so ANY amount you sell it for you'd owe income taxes on that money. Be careful there.
Hey, thanks for checking out this video and being part of the channel...appreciate you! Cheers.
Question, I own two llc's and do some work as a sole prop so it's really confusing. I really don't drive that much but I do travel to clients within the county. I just don't even know do I need to register the vehicle under the business name, one of them or can it be under my name
You don’t need to register the vehicle in a company name to generate the write off. You can only write the vehicle off against one of your company’s revenues (not all three), and I’d suggest working with a CPA to strategize how to best align your annual write offs within each of your respective companies/revenue streams.
What about deprecation deduction for actual expense method on your examples??
@Joseph Maroun - The depreciation for the actual expense method is just that...the actual expenses. That's your deduction. If vehicle is 100% for business - then 100% of those qualified expenses are a deduction. If the vehicle is used 50% for business then 50% of those expenses would be a deduction. It's relatively straight forward. You're not allowed to take the actual expenses AND an additional amount for 'depreciation'. Thanks for taking the time to check out the video...hit me up if you have additional questions. Cheers, boss!
Does stuff like tire changed get covered in years to come or everything is only the first year
@DJ C - If you're referring to standard mileage rate method - no. If you're referring to actual expense method then yes, purchasing new tires for your vehicle would be a deductible expense in years to come. Track your expenses EACH year.
Thanks for checking out the video! Appreciate you...cheers!
I just started a cleaning business tht requires me to travel from client to client in mid August but I haven’t put close 25k miles on my vehicle do I still a deduction for the miles I did use? I do abt 20miles a day, Wht do u suggest the best course to take wld be? Thanks and I greatly appreciated your video
@J Gill - Congrats on starting your cleaning business - awesome! I hope you have substantial growth in your first year and that you continue to hustle. If you haven't purchased your vehicle this year (2021) then you would not be able to write off the purchase because there is no purchase in 2021 for you to write off. Thus, you can track your vehicle expenses and write off those that are business related OR you can track your mileage and write off your business miles driven. Alternatively, you can track both and see which one will get you the higher tax deduction...whichever one you choose though - just stick with it and only change (mileage vs expenses) if you purchase another vehicle.
If your expenses are relatively small then I would keep it simple and write off the mileage.
Thanks for taking the time to check out the video and channel...cheers boss!
Sorry if you covered this question, I skimmed through and I don't think it was addressed. I happen not to have filed my 2020 and 2021, although for 2020 I paid extra tax to be refunded later and I filled out everything on the basis of "standard mileage" (still not filed). From doing a few calculations, it's apparent that taking the "actual expense" method for 2021 will save me considerably more on tax. Here's where it gets confusing. My car is leased. I read that once the standard mileage deduction is taken, I'm stuck with it for the remaining lease years (unlike an owned car). So I'm thinking of going back to my schedule C of 2020 (year also is 1st year for my vehicle) and changing it to "actual expense" as well in order for "actual expense" of 2021 is allowed. But I'd like to still have a door open for "standard mileage" in the future. Does that mean that if I choose it for year 3, I'm stuck with it for 4,5,6.... Here's more confusion to throw into the mix. I'm most likely purchasing at the end of the lease term, so do I go back to scratch with 1st year "standard mileage" giving flexibility and "actual expense" causing me to be stuck with that method for as long as I use that car? I have some raw feelings for the IRS right now that I can't describe. Wasted a lot of time trying to get clarity.
@naj - Sorry you wasted time with the IRS trying to get clarity. Very frustrating. If you haven't filed your 2020 return yet then it sounds like you could still make the change to select 'actual expenses' instead of the standard mileage...as long as you acquired your leased vehicle in 2020 and placed it in service in 2020 then you're good.
Once you select actual expenses you have to stick with it and cannot switch over to standard mileage. However, you are allowed to select standard mileage first then switch over to actual expenses in future years...but that eliminates some of the benefits - like bonus depreciation in year one...which is why you can go from standard to actual, but not actual to standard...because the write offs are smaller when you do not include year one write offs with actual expenses/179.
One thought to consider is keeping everything as standard mileage while you are leasing the vehicle, then switch over to actual expenses when you actually decide to purchase the vehicle. Sounds to me like you have a high lease payment and drive the vehicle very little - hence why the standard mileage rate option is getting you less bang for your buck compared to writing off the lease payments. Another thought to remember is regarding the 50% rule....in order to use actual expenses and 179 you have to use the vehicle for a minimum of 50% business....vs standard mileage rate does not have this requirement.
Sorry for the lengthy reply, but wanted to ramble on for a moment there...LOL. Hey, thanks for checking out this video and the channel...hope there are other vids within my content library that are also of interest to you about retirement planning and financial planning. Cheers boss!
@@Financial_Awareness - Thanks a lot man. I very much appreciate your long reply. This is what makes it really confusing, and I’ve gotten some contradicting info (although you may be right anyways). Funny thing is some accountants around are unsure either. There is a distinction made between leased cars and what seems to be the alternative: owned cars (not spelled out). For a leased car, the rules seems to be "once you go "standard mileage" you can never go back", the opposite of owned cars. The IRS has one pathetic short sentence about it, and notice that it doesn’t phrase it to say that you would be stuck with “either method” for the lease. Just says it in regards to "mileage". That leads me to believe that you can choose actual expense for a lease then switch to standard mileage but once you switch you’re stuck with it for the rest of the lease. Again, I'm in no way 100% sure. When I inquired with Free Tax USA if I can do year 1 and 2: actual expense year, year: 3 mileage or actual (i'll have to decide on this), year 4 (purchased vehicle): back to mileage as a 1st year use of owned vehicle, they said they can't find anything that suggests this would not be OK and "Either way, there likely won't be any issues with your return". So with all I could gather, I'll have to take a leap of faith at some point next month, and take my precautions at the same time. If IRS contacts me on year 3 or year 4, I'll have to ask for a revision of the previous returns, pay leftover tax and interest, if that means "actual expense" will waste me money down the future, or I'm out of luck.
Yes, I drive so little (occasionally) and it comprises a 80%+ percentage of my driving. I don't drive much period and work from home. But I will be making this full or close to full time starting 2022-2023 and the tax equation will significantly change. Thanks once again :)
@naj - Super happy for you to be navigating these waters, man. Just think of all the knowledge you've gained from all the research, phone calls, discussions, and videos you've watched...just awesome. Proud of you for taking the bull by the horns and leading this charge yourself and taking personal responsibility to make sure you do it correctly. That behavior doesn't get praised enough and I'm just proud of you.
Seems strange to me that you can't get a straight answer, but I, too, have experienced some frustrations in these calculations - regarding how other CPA's interpret the IRS language...so I hear ya that it is frustrating to hear different opinions from CPAs about the same topic.
Seems as if you are super close to finding the right answer or...yeah...take that leap of faith. If you do find some sort of clarity on this topic regarding leased vehicles then please take a moment to reply to this thread and let me know...I'm curious myself.
Thanks, Naj!
What if we don’t have a business, but are contractors with 1099 and the vehicle is 100% used only for business? Does it not apply to contractors?
@Yesi Ibarra - Yup…applies to you & your husband as well. As a 1099 Contractor you’ll use Schedule C for your business revenues and expenses…that’s where you’ll put your vehicle mileage or purchase to get one of these deductions. Hope that helps.
Thanks for checking out another video! Cheers!
Hi this is sam. I m wondering whether I can use standard mileage or not. I m married and doing food delivery. My car registered my wife’s name. And paying loans every month and making high mileage between 150-200 miles daily except going to location where I work and back to home is 50 miles total(before starting my shift). My car is 7 years old.
Can I use standard mileage in this situation or what would you recommend?
Thank you!
@samet mete - What's up, Sam! Yeah, sounds like standard mileage rate is the way to go in your situation. If you ever purchase a newer vehicle, check out these videos again or chat with a local CPA in your area to fully grasp the details from their perspective. Hey, thanks for checking out this video...hope some of the other vids within my content library are as helpful. Cheers, boss!
if you use standard mileage deduction and have a business loss, can you passthrough the loss to offset your w2 taxes? are there any limits?
Tough call. A CPA with personal knowledge of your situation could be a better resource for you. I do believe you can, but you just run the risk of getting 🚩🚩🚩. Make sure you document everything and just save it in a file just in case.
Can I use the 380 miles to travel to a new state for work? And the 380 miles to travel home??
As a travel nurse.
Thx!
@JoetatoeSniff - I LOVE travel nurses!!! My cousin is a travel nurse and my wife was an ICU nurse for about 8 years before she went back to school to become a CRNA.
As a travel nurse I believe there are some expenses that are paid to you as part of your 2-3 month contract...so technically those expenses are not allowed to be written off (since they are basically reimbursing you for those costs). Keep an eye on that and def be sure to work with a CPA so you can take full advantage of all that is available to you within your chosen profession. All that said, yes, I do believe your commuting traveling to that assignment and the travel home would be eligible as a business write off.
Cheers!
For traveling to another state as a write off, could a legit reason be discussing investment opportunities?
@dylansnapp7921 - great question! I believe you are able to do that, but the key is in the documentation, nature of the business, and your comfort level as a tax payer.
So, I wouldn’t say just driving and talking in the car would suffice. There needs to be official business purpose…so a written email to the business partner confirming your intentions, schedule the drive on a work calendar, and don’t just stop there…to be clear, I would target 1-3 specific address locations that you intend to drive to…and make sure to take a photo or bring home some flyer material from an open house…this way, if your mileage ever got audited you would have multiple layers of legitimate work documentation of this particular driving session…then of course…track your business-related miles driven.
If any CPA sees my response and wants to add/correct, please feel welcome to chime in…but that’s how I see it, Dylan. Thanks for checking out the channel! I recently started a daily vlog about many financial topics…would love for you to check them out!
What about a high priced vehicle and a plan to drive a lot???
@Glenn Sveum - Depends on your situation and how long you anticipate owning and operating the vehicle...personally speaking, I wouldn’t drive a high priced vehicle a lot because it is such a crushing blow to the value of the vehicle. However, that said, if your business is doing successful enough to “eat” that depreciation from a lot of driving OR you’re just a “car guy” and really enjoy driving higher priced vehicles for the enjoyment vs the functionality of them...then just understand that you’re sinking more money than necessary into a depreciating asset vs putting those funds elsewhere to help grow your business / wealth. I guess another suggestion would be to have multiple vehicles and use one as a “daily driver.” Most successful business owners I know have daily drivers and use their nicer vehicles for weekend driving / date nights / etc. I don’t know - what are your thoughts?
Appreciate you taking the time to check out the video man! Thank you! Hope there are other videos on the channel that are of interest to you. Cheers boss!
Ok I formed a business this year.
I have a former landscaping truck which is a 91 R30 that I want to use to tow cars to part out online. Horrible mileage, high insurance, high maintance cost. But it is a tank.
I also have a 87 V10 that is my auction/scrap truck.
I plan on using both of these only for business and my 3 other rides for personal. But the 87 burns about as much oil as it uses in fuel.
Would a engine swap to a newer engine be a full or partial deduction if using actual.
Zero chance I’m touching that question! 😂
Def want to speak with a CPA in your area for this. My initial reaction is…how are the current vehicles titled/owned/being depreciated? Are they in your name with zero depreciation on them now or did you write them off with your landscape business? It is my understanding that you can only write off a vehicle for one business.
So, if you wrote off your vehicle with your former landscape business then you might have $0 basis already…if that’s true then you’ll need to inquire if “an engine swap” is sufficient for a vehicle to be reclassified in some way…if the vin never changes then I’d say the engine swap would be your new basis of value that you added to the vehicle and as such that’s all you may be able to depreciate/deduct.
If you’ve never written off the vehicles personally via 1099 or through your old landscape business then I think you’ll have less issues moving forward.
Appreciate you checking out the video. Cheers!
@@Financial_Awareness
Yes I have a CPA to run this buy. Never hurts to get a outside view from another one.
I bought the landscaping truck outright from a landscaping company. Just giving you a visual of a 7000lb old flatbed truck that was previously used for hauling sod that I want to use in my business for pulling cars on a trailer behind it.
That one is ready to go minus the expensive plates and reg(it just sits currently). The other 5500lb truck has a custom bed meant for making hooking ratchet straps etc to easier for uneven loads and is only a 1/2 ton. Good for uneven loads like scrap or furnature. But that one needs a engine soon as it burns a quart about every 100 miles. This other truck gets about 30% better mileage but a engine swap could increase that to 50% over the 7000lb truck.
While the added fuel used is a write off the excessive oil consumption of lets say 120quarts bought/used over 14k might raise a red flag.
Oh and no emmisions or vechical tax on storing rides in my state. If they hit the road they of course need reg/ins.
So wait, when you do the ACTUAL method, does the car have to be in your businesses name or can it be in your personal name?
@Soul Bowls - Quite a bit of healthy debate over this, but my short answer is that it doesn't matter if the vehicle is in your name or owned by the business. I'd say most self employed folks that are a one-man band operation just keep the vehicle in their personal name, but as your business grows or your sophistication of your business accounting grows you'll eventually purchase vehicles in the name of the business vs your personal name. If you're the owner of a business and are buying a vehicle for an employee to drive then you may want to strongly consider buying the vehicle in the name of the business to avoid personal liability in the event of an accident....liability is a big driver in this discussion...hence why one-man-band self employed folks don't care because they're the one driving the vehicle anyway.
Hey, I appreciate you taking the time to check out the video and comment...thanks, boss! Cheers!
1099 in the IT field. Would we be able to take advantage
Yes.
What if I have home care and makes a lot of money and I wanted to start truck business can I use my home care taxes to buy a truck for my other business
Not sure I fully understand your question. Using taxes to buy a truck for another business....I don't get it - sorry!
i have a hypnosis business and thinking of getting a van and making a conversion out of it and taking my business on the road to reach more clients and holding sessions in the van as my office. Is this something that I can do with this deduction?
@Laura Molecavage - Makes sense to me! 🤷🏼♂️ ...since you’re already planning it out then I would recommend you make two additional phone calls...one to your property and casualty insurance agent and one to your CPA...they will fill your brain with more information so you’re fully prepared. Hey, appreciate you taking the time to check out the video! Cheers boss lady! Good luck with your new venture!
@@Financial_Awareness thank you.. your welcome.. great information. yes. here is to new adventures :)
So wrapping a vehicle forces the actual expense method, am i right?
@blipblop92 - Nope, that’s not how it works. Wrapping a vehicle doesn’t force you to do anything. Actually, you can take the standard mileage rate method & do the wrap because the wrap is more of a marketing expense than a vehicle expense. Nothing “forces” you to chose one method of depreciation over another…it’s just based on which method the numbers say is a better deduction for you in your situation. I made another video (better IMO) about this topic. It’s in the channel…just gotta scroll to find it. Mileage rate vs vehicle expenses. Hope that one will help! Cheers!
Edit: you made this comment on the video I’m referring to. 😂
What if you had a 26,000 car that you plan to drive a lot. Would you go for milage then to ?
@Jabie Sorenson - You pretty much described the situation I was in with my previous vehicle. If you have the time go check out my other vid about this same topic as well…the one with the Jeep on the thumbnail pic. Yeah, do some research & crunch your numbers to be sure, but if you’re going to keep the vehicle for years and plan to drive it a lot then I’d go standard mileage rate as your deduction method of choice.
Thanks for checking out the channel…appreciate you, boss! Cheers!
What if I started my business mid year, and don't have beginning of the year odometer? This is personal car used for some business fyi
@Kenny Ness - It would be at the start of using the vehicle for business and not necessarily the “Jan 1st” start date.
@@Financial_Awareness thanks!
Hi there...question: I Drive Uber and I obviously use the Mileage deduction...I bought a new car on Dec 4 2021 and started using it right away...when doing my taxes online (H&R Block) I got asked if I wanted to take the Bonus or Standard Depreciation...no idea what that means...but my main question is: even after taking that big depreciation, can I still do the Mileage deduction??? Or once I choose the Bonus (or Standard) Depreciation I can no longer take the Mileage Deduction??? I feel like I am double-dipping if I take the Depreciation AND Mileage Deduction...thank you.
@David López - Yes, you are correct…that is double dipping and it isn’t allowed. Once you use the “actual expense” method of writing off/depreciating your vehicle you have to stick with that method. Here’s a link to Intuit (who runs TurboTax)…
ttlc.intuit.com/community/business-expenses/help/can-i-switch-between-the-standard-mileage-rate-and-actual-expense-method/00/26060
If I were you, I would run some hypothetical scenarios and see which of these methods of depreciation/deduction best suits your driving habits and go from there. Personally, I have used standard mileage rate for 15+ years and am finally taking actual expense method for the first time for 2021 taxes.
Hey, thanks for checking out the video and channel…hope there are a few more videos within my library that are of benefit to you. Cheers!
@@Financial_Awareness Great...thanks for the information...it is odd that H&R Block let me enter miles for the new car AND gave me a Bonus depreciation as well...I drive 50-60k a year, so Mileage is a no-brainer...I was just curious about the Depreciation aspect. Thanks again...Great job on your videos!
Thanks! If H&R Block’s automated software allowed you to do that then I’d double check with a CPA. Before responding to you I looked it up to be sure….buuuuuuutttt…I do remember reading somewhere that you could switch from one method to the other….but def not do both at the same time.
@@Financial_Awareness You da man!...Thanks again.
What if you are a W2 employee but your vehicle is required to perform your work?
@Jacob Spaulding - Then you’re kinda screwed to be honest. However, in situations like this the employer typically provides you with some sort of a vehicle reimbursement or some kind of compensation to make up for the wear & tear / use of your vehicle.
IF you do not have any reimbursements from your employer as a W-2…then the IRS does allow you to deduct those unreimbursed expenses that EXCEED 2% of your AGI…which is why I said you’re screwed…because my assumption is that the amount of expenses might not exceed 2% of your AGI…which sucks.
Hey, thanks for checking out this video and being part of the channel. Cheers!
I fix my own car. Can I deduct tools (not parts) on the top of the mileage deduction?
@right power - Nope. Can't deduct both standard mileage AND actual expenses in the same year. You can switch back and forth from year to year depending on which method provides you the most value, but can't do both at the same time. Thanks for checking out the video...cheers boss!
@@Financial_Awareness Thanks a lot.
Hello I am planning on purchasing a truck over 6000 pounds Ram f150 or possibly the cyber truck for my mobile detailing and roadside assistance business would I be able to finance it and if it were to be purchased and put to use near the end of the year for 100 % business use would I still qualify for the 100% depreciation for the same year any advise would help thanks
@Reptile Geeks - Thank you for carving out time from your busy schedule to learn about this topic...I think that’s awesome you’re investing time ON your business compared to investing time IN your business. Good on you! Yes, you can finance it and still take advantage of the accelerated depreciation. Yes, as long as you place the vehicle in service in the year you purchase it then you can write it off against your revenue for that year. I’ve actually got an entirely other video that speaks directly to Section 179 for that topic. This video is more regarding should you do standard mileage rate deduction OR actual vehicle expenses...because once you choose one of these accounting methods you’re committed. Run a few “what-if” scenarios...look at how many miles you drive per year for your mobile detailing business and compare like 3-4 years of vehicle mileage write off deductions VS vehicle expenses (which includes accelerated depreciation)...keep in mind you can’t use these accounting methods to generate a loss to try and get a tax refund - as that isn’t allowed. Thanks for checking out the channel! Would love for you to subscribe and check out a few of my other self employed videos if you haven’t already. Appreciate you and congrats on the truck purchase!
I’m in same boat as you I’m planning to financing a truck over 6500pds wondering can I write it off 100% or am I’m writing off my payments. I can’t find a video about that
So I do Instacart and Amazon flex... time to get a new vehicle. Watching these videos because I am self employed. Should I create and put under a business so I can write off veh? Does this pertain to this type of business 🤔 i am new to this. Thank u in advance
@Kelly S - Welcome to bring new at all this! Well done on taking that leap and trying to hustle. Nice. No, you do not have to purchase the vehicle in the name of a business in order to get the write offs. Yes, vehicle deductions do pertain to the business you’re now in. If you do not need to “show off” how fancy your new vehicle is then you could get a reliable, more affordable car and write off all those miles you’ll be driving. I would try and run the numbers based on what you anticipate doing regarding monthly miles driven compared to what you can write off in year one and beyond from an expense stand point and go from there. I’ve always written off the miles driven, but there are some situations where one option is better than the other. Just try and make the best decision for your situation and know that you can use a different method of deducting your vehicle with a different vehicle purchase down the road.
@@Financial_Awareness thank you for your quick response. I just prefer a new vehicle. The tax code 179 piqued my interest just to take all liability off myself and put under llc. That is why I thought best scenario for me would be to get Llc and write off under business.
@Kelly S - Gotchya. Hope you enjoy the new ride you’ll be buying! The LLC will help, but if you’re concerned about additional legal issues and liability then you should take a peek and Google “creditor protected assets”. I may have mentioned it in this video or another one, but you don’t have to buy a brand new vehicle in order to be eligible for Section 179...it just has to be new to you. But if your preference is to buy new for less maintenance and more reliability then I understand that thought process. One of my older Jeeps left me stranded on the highway and that was a very frustrating experience.
@@Financial_Awareness ok. Thank you and that's my thought as well. I have been stranded as well. Thank you again. Will be watching all videos to get a better understanding of the best situation for me.
I know this is old. I bought a van for work in January. I hate it so want to buy a replacement. If I trade it in before end of the year can I still deduct the entire van price or do I need to wait till next year to trade it in?
@
thomas crompton - If you deduct the entire purchase down to $0 then you'll have to pay short term capital gains tax on the amount you are given for the van since you held it for less than one year. Prob a good idea to run this question by a CPA in your area to confirm the best route to take.
@@Financial_Awareness I was thinking that but not sure. I'll likely just wait and hold it till 1st week next year. Write it all off then buy new one and deduct yearly mileage rate for the new one like I have done previous years.
@@thomascrompton7775 - Sounds like a plan, boss!
“Because you can only lease a new vehicle” - what do you mean by that? To get actual expense you have to lease you can’t finance?
Hmmmm, I’ll have to re-watch that segment of the vid to refresh my memory…can you tag the time?
Sorry for any confusion…no, you do not have to only lease a vehicle to be able to do actual expenses. I believe the context in which I was saying that / making that comment could have been in regards to the fact that you cannot lease a used vehicle…you can only lease a new one. 🤷🏼♂️
Tag the time of the vid and I’ll rewatch.
@@Financial_Awareness 4:00 when talking about Scenario 1
@@Financial_Awarenessahhhh! Thank you makes perfect sense! Man you responded so fast 😊 definitely subscribing.
Quick question, so with actual, purchasing a used car like a 2022 BMW M4 for business. The make standard 5 year depreciation in the first year is $19,500. Do I get to write that off along with all the other “Actual” Expenses like monthly payments, insurance etc…. ?
So, my cya response is usually to encourage you to consult with a CPA for your specific needs/question. That said, your standard is closer to $11k and with bonus depreciation in yr 1 it’s $19k+ & yes you’re able to write that off plus other expenses…this turbo tax link is pretty good:
turbotax.intuit.com/tax-tips/small-business-taxes/business-use-of-vehicles/amp/L6hi0zzzh
Whether you do all that in one year or do straight line depreciation is up to you and the cash flow needs of your business and how much you want to show this year vs future years…so think through that for a moment before you file. Keep good records and don’t be afraid to reach out to a CPA in your area…the larger your business grows the more important they become. Congrats on all your hard work…hope you crush it this year! Cheers!
Yo! Ok, just re-watched that segment. Yeah, so I was referring to how a leased vehicle won’t have many “repair costs/expenses” because you can only lease a brand new vehicle…can’t lease a used vehicle unless I’m mistaken there. Lol. So a leased vehicle with “actual expenses” should have very little repair costs…unless you are buying a terribly crappy brand new vehicle that needs repairs immediately. Lol. So yeah, that’s what I was referring to. “You can only lease a ‘new’ vehicle.”
Considering you can write off 100% of a vehicle weighing 6k or more, how much can you write off if you got a super car??
@Dipper964 - Can you give me a rough idea of a super car that weighs over 6,000 lbs? Just googled it and couldn’t find one over 3,000 lbs.
@@Financial_Awareness I was just asking if there’s a percentage that can be written off for a supercar
@Dipper964 - Gotchya. To my knowledge, I am not aware of a percentage. If a super car purchase can be justified as a “business related vehicle” then I’m sure you can write off some of the vehicle. A buddy of mine owns multiple super cars and has flipped them for profit at times as well...I’ll have to catch up with him and ask to see what’s he’s done in previous years. If I can get more info I’ll reply again and tag you.
@@Financial_Awareness sweet, I’ll appreciate it. Thanks
So wait, if I already owned a personal vehicle that I’ve had for six years, and I decide to start a business which requires business use of my vehicle I cannot take any mileage deductions because I’m Not in the first year of acquiring my vehicle?
@Ripdip City - Incorrect. In the situation you described you CAN take the mileage deduction, but you cannot take Section 179 vehicle purchase write off (because you did not purchase the vehicle in the year in which you placed it in service for your business). Hope that clears it up.
Hey, thanks for checking out this video & the channel...really appreciate you. Cheers, boss!
@@Financial_Awareness thank YOU for the great content and delivery. You’re a big help!
@@ripdipcity3322 - My pleasure boss! Hope I'm able to find some good Dip'n'Rips in the stock market this year. Cheers to you starting your new business & hopefully some awesome stock market profits as well. Go get it!
@@Financial_Awareness yes! It’s off to a rough start but I’m learning that patience is a key ingredient!
I have a question. What if I have been using my car for the business in 2020 and then I plan to get another car that I would probably be using for the business more compared to my current car. Would I be able to do the deduction for both cars?
Ash03 - Great question! If you are accounting for this deduction via “actual expenses” then I believe that is vehicle specific. On the flip side, if you are deducting mileage driven then I don’t believe it matters which vehicle you use...just track your business miles for sure. A CPA in your area can confirm the specifics of this is your situation. Double check your math though...because if you own or are purchasing a modestly priced vehicle then the mileage rate deduction may get you a better bang for your buck. Are you buying an expensive car or a moderately priced/reasonable car? The less you’ll spend on the car the more valuable the mileage rate deduction will become.
I am planning to get a Tesla Model 3. So if I’m understand this correctly, if I do a mileage deduction I can do for both car and if I do actual expense it will be only for one car?
Ash03 - Best course of action is to confirm that with a local CPA, but yes, that is my understanding. Tesla Model 3 is a really nice, reliable car that will likely require very little ongoing maintenance. So, compare the immediate, one-time benefit of writing off the percent of the vehicle that will be used for business (50%, 80%, 100%, etc)...then compare that to all the business miles you anticipate driving each year...the combo of high miles driven with a moderately priced vehicle will get you a better total deduction over multiple years vs the one time benefit of writing off the vehicle. Additionally, Tesla Model 3 is most certainly under 6,000 lbs Gross Vehicle Weight Rating - so you’re capped at $18,100 you can deduct from a vehicle purchase if that nature...so over a few years, I think you’d get a better deduction taking the mileage rate each year vs vehicle expenses...but that is simply my opinion. Worth what you pay for 😂. Anyway, hope that helps a little. Let me know how it goes! Appreciate you and hope to see you around from time to time on the channel.
I see that 240 in your stock footage
😏😏😏😏😏
@The Moxie Channel - You’ve got a good eye!
@@Financial_Awareness Got the car guy eye 👀
It's a shame when I hear uber drivers and such are not keeping track of their business and personal miles because these companies don't keep track of all of your business miles; a lot of them just count the miles from the pick up to the drop off and don't consider the miles you drove to the pick up and the miles you drive back from the country to get back to civilization. We can't just hang out in the country and expect a ping so the miles you're on the clock doing business count. We're not out there joy riding.
@Brenda Trump - Completely agree with you. Thank you for checking out the video. May I ask a question?....(as someone who hasn’t done any Uber driving myself)....does Uber (or Lyft) provide some sort of education/tutorial about keeping track of “business miles driven” so that newer drivers can get educated? ...because it is my opinion that some (not all) Uber drivers simply aren’t educated properly to understand they should even do that at all. What are your thoughts? Appreciate you!
@@Financial_Awareness I'm pretty sure they don't. That's why I try making these comments on people' youtube channels about drivers about it. They probably just trust what the company says they drove and are paying way more in taxes than they should.
I started driving for Uber Eats the first of May 2020 and by the end of 2020 I had put 16,000 miles on my car and 79% of those were business. I don't drive much for personal use. I bet Uber will have on the 1099 that I drove 1/3 of those.
@Brenda Trump - Gotchya. Well, have you seen your 1099 from them yet? ...because it is not my understanding that miles driven are put on a 1099. I’ve also got a video regarding some tax credits and other deductions for self employed and 1099/Sole Proprietors...some info in there could be helpful for you and your tax return you’ll be filing soon perhaps. Thanks for helping bring awareness to the Uber driver miles. If you enjoyed the video please share with other people in your Uber community...the more tax deductions and credits y’all can get the more money will stay in your pockets! We could all use more of that during these times. Appreciate you! Thank you
@@Financial_Awareness I'm still waiting on it to arrive in the mail. I'm not positive they show the miles they calculate on the 1099 or not. I'll keep you posted; hopefully any day now!
Are we not gonna talk about that guy lifting the red car by it's bumper... I would suggest a new mechanic lol
@Cheating is Competing - 😂😂😂😂😂 Was just stock footage I used in that segment I believe, but yeah…not good to lift a car by it’s bumper. Lol
@@Financial_Awareness yeah I knew it was just random footage I was just being a smartass. Good information in the video though.
I spent 21k in fuel lol
Lol. That’s a lot of fuel! Do you prefer a dedicated gas card for points or is there another way to benefit from an annual expense like that? Curious to learn because we just use our Amex Gold cards for as much as we can…seems to have the most bang for our buck (points wise) for how we live/spend.
@Financial Awareness with K.Scholl I do use a dedicated card. I use a Barclay's that gives me points at hotels cause in terms of what I get back compared to my cash back or flyer miles I get way more. I get 5 points per dollar plus 30k bonus a yr and rooms are about 12 to 15k a night. I get about 10 to 12 free nights a yr
That sounds pretty good to me! Dang. Nice! Glad you’re able to capitalize on an expense like that and be sure to get the points. Well done! Have an awesome week, sir!