Tax savings through investment in a new car for consultant business?

I have earned money as a consultant (self-employed) as well as an employee (8 month) this year. If I buy a new car tomorrow - can I claim the car as a business investment and thus reduce my income for this year?

As a consultant (self-employed), you can deduct the actual expenses of running your car or take the standard mileage rate (48 1/2 cents per mile). You must use actual expenses if you used your vehicle for hire (Taxi) or you used five or more vehicles simultaneously in your business. You cannot use actual expenses for a leased vehicle if you previously used the standard mileage rate for that vehicle.

Actual expenses will include gas, oil, repairs, depreciation, insurance, dmv fees, etc.. You can deduct the percentage used for business. Keeping receipts is recommended.

As an employee you can only use the standard mileage deduction. However; if your employer provided an allowance for vehicle use, you will not be eligible for the deduction (Check box 12 for an L when you receive your W-2 if you are not sure).

It is recommended you keep a good log of miles used for work. If audited the IRS will question the method used for calculating your mileage for work and personal use.

Most likely not, but you should be able to take the deduction of $.485 cents for every business mile you drove while doing your self employed work. Make sure to have records available (or get them in order now!) for proof of your driving.

The best technique ever allowed by the IRS is for you to put magnets or window vinyl lettering on your car with your business info on it and then EVERY SINGLE MILE you drive for ANY purpose is fully deductible.

Hope this helps!

Wes
Norsew Investments, LLC
Rochester, MN
Helping business people succeed!
http://www.alternativefranchise.com

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