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Business use of a vehicle

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Looking for a little advice here. I just purchased a brand new vehicle and put the vehicle in my name, not the company name I just started for which I will be the sole proprietor. The vehicle will be used 85 % for business but even then, that will only account for about 10,000 miles a year. I understand that I can use the standard milage rate at 32.5 cents per mile which would equate to $3,250 in this case and then 85% of that cost. Do I still get to depreciate the vehicle yearly using the standard milage rate? Also, I understand that I can file the actual cost instead? This includes insurance, gas receipts oil changes, tires etc.. Is it true that you can even write of a lease payment? If someone like myself is driving very few business miles, would it be better to file actual instead and prehaps think about leasing a vehicle? Thanks in advance to any one replies.



Car expense

If you want to use the standard mileage rate for a car you own, you must choose to use it in the first year the car is available for use in your business. Then in later years, you can choose to use either the standard mileage rate or actual expenses.
If you want to use the standard mileage rate for a car you lease, you must use it for the entire lease period.

If you elect to deduct actual expenses and you are leasing the car, you deduct the lease payments and you do not deduct depreciation. If you own the car, you deduct depreciation.

To determine which method is best before you purchase or lease, use estimated costs and work it out both ways to determine which is best.

This is a little complex and there are a number of rules and considerations. I suggest you get IRS Publication 17, which is a good explanation of the income tax for individuals. Look up car expense in Pub 17. It explains all the rules. You can download Publication 17 for free at the IRS site at http://www.irs.ustreas.gov/forms_pubs/index.html.

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