CPA - Managing Director of an Accounting Practice at Total Books Accountants
Answered 2 years ago
Vehicle expense allowance is a hidden goldmine if you pick the right one. Unfortunately, clients often pick the wrong one. The two options are; 1: Claiming the standard mileage rates as allowed by the IRS (Guidance link here https://www.irs.gov/tax-professionals/standard-mileage-rates) or 2: Claiming the usual vehicle running costs, including gas, repairs, insurance, lease payments & registration. Unless you run a super expensive vehicle that breaks down a lot, the Standard mileage rate (67 cents/Per-Mile option will always yield 2 or 3 times more expense allowance than using the usual vehicle running costs. So why claim $1000 when you can claim $3000 as an expense? For business-related mileage that is not regular commuting from work to home, I advise that the clients keep a worksheet, diary, or even a phone app to record the business. Many of our clients use Xero Cloud Accounting Software, and we recommend the apps Triplog, Captureexpense and Veryfi for this (Link given here: https://apps.xero.com/us/search?q=mileage) to simplify mileage tracking. A good accountant or tax advisor will always compare the two options above and advise the client on which one to use before a client even has to ask them. Wink, Wink.