Question about Car expense deduction


T

The Avatar

This doesn't exactly deal with Quickbooks, but I know that there are a
lot of smart tax people in this grou p . . . and I do use Quickbooks
to keep track of business expenses, etc for the following businesses,
so I thought you all might have some good advice.

Here is the situation:

In 2003, I purchased a car that was being used for business purposes
(restaurant business). The only mileage put on this car was either
for "business" or for commuting to the business.

Rather than taking the mileage deduction, I chose to expense all auto
expenses (naturally, multiplied by the percentage of business use) as
well as to take the allocable depreciation deduction for the car.

In 2004, I started a second business - real estate agent. I have kept
track of all mileage incurred while showing homes. However, when it
came to fuel expenses, etc., I continued to track them as part of the
restaurant business. The amount of miles put on the car from the real
estate business is dramatically larger than the miles from the
restaurant business.

So basically, I'm in a situation where when I first go the car, I was
using the expense/depreciation method, but now I find myself in a
situation where I'm using it for business purposes other than what I
originally began expensing it under.

What can and should I do or be doing about this? How can I possibly
separate the fuel expenses and depreciation expense related to the car
and allocate it among the two businesses so that I get the maximum
deduction possible for each business?

Any advice would be appreciated.
 
A

A

The Avatar said:
Rather than taking the mileage deduction, I chose to expense all auto
expenses (naturally, multiplied by the percentage of business use) as
well as to take the allocable depreciation deduction for the car.

In 2004, I started a second business - real estate agent. I have kept
track of all mileage incurred while showing homes. However, when it
came to fuel expenses, etc., I continued to track them as part of the
restaurant business. The amount of miles put on the car from the real
estate business is dramatically larger than the miles from the
restaurant business.

So basically, I'm in a situation where when I first go the car, I was
using the expense/depreciation method, but now I find myself in a
situation where I'm using it for business purposes other than what I
originally began expensing it under.

What can and should I do or be doing about this? How can I possibly
separate the fuel expenses and depreciation expense related to the car
and allocate it among the two businesses so that I get the maximum
deduction possible for each business?
You certainly cannot mix the two because you are in deducting certain
expenses twice. The standard mileage rate includes the total cost of
operating the vehicle including depreciation. You also cannot use the
standard mileage rate if you have taken a depreciation deduction using any
method other than straight line or a section 179 deduction. I think all you
can do is use the actual costs method and allocate between personal use,
business 1, and business 2.

You should probably post this to misc.taxes.moderated
 
Ad

Advertisements

B

Bryan Kellar

Hi there!

In 2003, I purchased a car that was being used for business purposes
(restaurant business). The only mileage put on this car was either
for "business" or for commuting to the business.

Rather than taking the mileage deduction, I chose to expense all auto
expenses (naturally, multiplied by the percentage of business use) as
well as to take the allocable depreciation deduction for the car.

In 2004, I started a second business - real estate agent. I have kept
track of all mileage incurred while showing homes. However, when it
came to fuel expenses, etc., I continued to track them as part of the
restaurant business. The amount of miles put on the car from the real
estate business is dramatically larger than the miles from the
restaurant business.

So basically, I'm in a situation where when I first go the car, I was
using the expense/depreciation method, but now I find myself in a
situation where I'm using it for business purposes other than what I
originally began expensing it under.

What can and should I do or be doing about this? How can I possibly
separate the fuel expenses and depreciation expense related to the car
and allocate it among the two businesses so that I get the maximum
deduction possible for each business?
Now, here is a question that CAN be appropriately answered.

You will want to keep track of your total mileage for each business. Then,
you can still either choose the standard mileage rate or use the actual
expenses method.

If you use the standard mileage rate, just multiply the mileage for that
particular business by the rate (.375 for 2004). Deduct the expense on the
Schedule C for each business.

To use actual expenses, figure up your total expenses, including
depreciation. You will then apportion them to each business, based upon the
number of miles the vehicle was used for each business. Some amount will
also be apportioned to personal use, if any. There will be some bookkeeping
to do and the auto expense will be listed on more than one form, just not
the SAME auto expense. The depreciation will be the same whether you use
the auto for one business, two businesses, or switch from one to the other.

By the way, those home tax programs will not deal with this well.

Good luck!
Bryan

--
 

Ask a Question

Want to reply to this thread or ask your own question?

You'll need to choose a username for the site, which only take a couple of moments. After that, you can post your question and our members will help you out.

Ask a Question

Top