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Keep Track of Business Driving Use

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in Small Business Tax,Small Business Tax Deduction Strategies

Q. In the past, I’ve done a lot of business driving in my car: about 25,000 miles a year. But because of gas prices, I’ve cut down this year. Will this cause any problems?

A.  Maybe. If you’re deducting actual expenses instead of using the standard mileage rate, you must recapture some of your prior depreciation deductions if your business use for the year drops below 50%. Plus, you can use only straight-line depreciation this year. Keep an eye on the business-versus-personal percentage to avoid this tax trap. Tip: Once you begin deducting actual expenses for a vehicle, you can’t switch to the standard mileage rate in a later year (but you can do it the other way around).

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