Questions and Answers About Vehicle Expenses
“If I bring all the daycare children to pick up my own child at preschool, can I count this as a business trip?”
“Can I deduct expenses associated with a leased vehicle?”
“I didn’t write down my miles, but have all the receipts from grocery shopping trips, so I know the dates I went. Is that enough to claim mileage for the trip?”
These are some of the many questions I’ve received during my February 10th webinar “How to Save Money on Your 2021 Taxes.” This webinar was sponsored by KidKare.
In this article I answer the many questions asked about vehicle expenses during this webinar.
KidKare is a comprehensive record keeping program that includes an accounting section that allows you to keep track of all your income and expenses. You can use it for free during a 30 day trial period. Afterwards it costs $99.00 a year. If you do sign up, please use the referral code 0659. If you do so, this will help support the work I do helping family child care providers be more successful as a business. Get more information about KidKare.
Many family child care providers fail to take advantage of all the deductions they can claim when using their vehicle for their business.
Providers can claim business miles for a trip in which the primary purpose of the trip is business. Primary purpose means that more than half of the reason for the trip was business. Trips to the bank to deposit money and trips to the library to get children’s books are clearly business trips. Trips to grocery stores and hardware stores can also be counted as business trips if the cost of the business items are more than the cost of personal items.
There are two ways you can claim expenses associated with your vehicle:
Claiming Vehicle Expenses: The Standard Mileage Method
Claiming Vehicle Expenses – The Actual Expenses Method
Questions and Answers
Q: Can I claim business miles if I commute from my home in New Jersey to my daycare in New York?
A: No. You cannot claim business miles when you commute to work.
Q: To claim vehicle expenses, does the vehicle need to be a business vehicle or can it be my personal vehicle?
A: It can be your personal vehicle.
Q: Can I claim mileage when taking the kids to the playground?
A: Yes.
Q: If I use the standard mileage rate can I also deduct the cost of license tabs and taxes?
A: You can deduct the tax, but not the registration fees. So, you can deduct the business portion of vehicle property tax, or it may be called excise tax, but nothing more when paying for new license tabs.
Q: Once you use the actual vehicle expenses method, you can’t go back to using the standard mileage method, correct?
A: Correct.
Q: I paid cash for my car. Can I still deduct expenses associated with it?
A: Good for you. Yes, you can still use the actual expenses method or the standard mileage method to claim expenses on your car.
Q: Do you count miles one way or round trip?
A: Round trip, unless you never returned home.
Q: If I bring all the daycare children to pick up my own child at preschool, can I count this as a business trip?
A: No. The primary purpose of your trip is personal (to pick up your own child). Bringing along daycare children doesn’t change that fact.
Q: Does the purchase of a car need to be in the business name for the actual car deduction?
A: No, it doesn’t matter whether the car is purchased under your business name or personal name. You can deduct expenses for the car in the same way.
Q: Can I count business miles on my car if the title and registration is under my name but I don’t drive it and don’t have a drivers license?
A: Yes. Someone else can drive your car and you can claim expenses associated with it.
Q: Can I claim more than one vehicle for my business if I use them for different purposes for the business?
A: Yes, you can always use more than one vehicle for your business. You could also count the miles in a vehicle owned by your spouse to conducts business trips for your business.
Q: If I get a loan to purchase a vehicle for the exclusive use of daycare, can I use the entire loan payment as a business expense, along with repairs and maintenance?
A: Assuming you are using the actual expenses method and 100% of the miles driven are business miles, you can deduct 100% of the actual costs, including repairs, maintenance, gas, etc. You can’t deduct 100% of the loan payments. Instead, you can claim 100% of the loan interest and claim depreciation on the vehicle.
Q: I didn’t write down my miles, but have all the receipts from grocery shopping trips, so I know the dates I went. Is that enough to claim mileage for the trip?
A: Yes. You don’t need to record odometer readings to claim business miles. You do need to know how far it is to and from the grocery store. You can get this by looking at your odometer reading once and making a note of how many miles it is. Or, use mileage apps or Google Tracker or other such online tools.
Q: Can I deduct expenses associated with a leased vehicle?
A: Yes. You can either use the standard mileage method or the actual expenses method.
Q: Do you recommend buying a car versus leasing one?
A: I recommend buying versus leasing. That’s because you will pay less when you buy. See my article, “Should You Lease or Buy a Vehicle?”
Q: Where does car loan interest go on my tax return?
A: If you are a sole proprietor, it goes on Schedule C, line 9.
Q: I don’t drive, but I take Uber to the grocery store. Can I deduct the cost of the Uber?
A: Yes, assuming you are purchasing more business food than personal food.
Tom Copeland - www.tomcopelandblog.com
Image credit: https://pixabay.com/vectors/van-vintage-cartoon-vehicle-2492912/
