Shift to ‘actual cost’ car deductions to offset high gas prices

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in Small Business Tax,Small Business Tax Deduction Strategies

The cost of gas continues to skyrocket in many parts of the country, reaching a record national average of $1.75 per gallon at the start of April. Most expensive state: California. Least expensive: Georgia and South Carolina.

Bad tax news: Since you're shelling out more at the pump, you're probably forfeiting valuable tax deductions if you use the standard cents-per-mile rate to deduct business car expenses.

Strategy: Switch to the "actual expense" method to deduct your business driving costs. Even if you don't change your recordkeeping habits until midway through the year, you can still come out ahead on your 2004 tax return. Obviously, the sooner you make the switch, the better.

Before you make the switch, however, realize this: Once you begin using the actual-expense method, you can't switch back to the standard mileage method for that car. And if you started using the standard rate for a leased car, you must cont...(register to read more)

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