Tax Tip of the Week
August 14, 2006

The standard mileage rate is an "all in" deduction which covers the total costs of running your vehicle, including gasoline, service, repairs, and depreciation. To use this method, you multiply the business miles driven by the standard rate. This gives your total deduction for business use of your vehicle.

For 2006, the standard rate for business use is 44.5 cents per mile.

If you use actual costs, you must keep records of all your actual expenses for gasoline, service, repairs, insurance, etc. You'll also calculate the depreciation on your car. Then you allocate these costs between business and personal use of your vehicle, based on the miles you drive for each purpose.

You'll need to keep more detailed records of your expenses if you use the actual cost method. Whichever method you choose, it's important to keep good records of the business miles you drive. In fact the IRS requires you to keep timely records of each business use.

The simplest way is to use a mileage log book, available from office supply stores. Note your mileage before and after each business use, and jot down where you went and why. This will make it easy to calculate your business use at the end of the year, and you'll be well-prepared if the IRS ever questions your deduction.

You can't use the standard mileage method in all circumstances, and the rules for business use can be complicated. If you have questions, please check with our office. We can advise you on the best method for your specific circumstances.

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E-Mail us at: finance@ClevelandSeniors.Com