How to Write Off Car Expenses | Actual Expenses Method Explained

if you're freelancing 1099 contracting or your small business involve driving then you can claim car related tax write-offs [Music] what is up everybody my name is tyra and welcome back to keeper tax your one-stop shop for all things 10.99 taxes here on this channel we create resources for freelancers independent contractors gig workers and anyone else who files or should be filing business taxes welcome back to another episode in the 1099 tax university series where i give you the tax content you need to set yourself up for success as a gig worker in our last video we talked all about the actual expense method versus the standard mileage method and how knowing the difference between the two can save you so much money on your taxes if you missed that video it will be linked down below and you can find it on our channel under 1099 tax university but today we will be diving deeper into the actual car related expenses that you can write off so let's get into the video what actually counts as driving for work so let's say something straight about mileage before we dive into the actual expenses as you may know rideshare workers and delivery drivers can claim their work miles on their taxes but you don't have to be an uber driver or a traveling salesman to claim car related tax deductions even if you spend the majority of your time in a home office you can still plan your occasional supply runs or trips downtown on your taxes let's say that you only drive for work for three months out of the year you can still write off all of those car expenses that you incurred during those months so if you fall into that category here are some more business mileage write-off examples you can write off miles incurred driving to a client driving to a professional conference driving to a meeting driving to meet a client for lunch or even driving to the post office the bank or even office depot or staples for anything work related now let's talk about what miles you cannot write off so the only exception to driving for work miles is what the irs likes to call commuting miles so if you work from a formal office space then the miles that you drive to and from work are not considered driving forward but if you work primarily from home then any miles that you incur for business meetings or running errands and all of that stuff that will count for business miles you can write off so why was it important for me to say this because you can use the amount of miles that you drove for work to calculate your vehicle business use percentage which you will need when you are finding your tax savings for the actual expense method you can also use a time sheet if you have it or some sort of law you could even use your calendar if you use the location settings in your calendar contrary to what some ultra conservative accountants may tell you you do not have to keep a line by line mileage log of everywhere you've ever driven in order to calculate your business percentage but if you are nervous about it then always take a slightly lower percentage so if you came up with the number 60 then use fifty percent and taking off that ten percent will be your room for error tax deductible car expenses so there are a few expenses that can be replaced with the standard mileage method if you decide to go that route but if you're using the actual expense method you will write off each expense separately and those expenses that you can write off are gas insurance lease payments maintenance like tire rotations your yearly inspections and all of that stuff oil changes the cost of the car and if you finance your car then you can write off your own car payments that is huge you can even write off a portion of the original cost of the car if you bought it a few years ago which is depreciation if you choose the standard mileage method for your vehicle deductions then all of the expenses that i just mentioned would already be included but there are more expenses that you can write off on top of those expenses when you are using the standard mileage method and those expenses are things like parking let's say that you have a monthly parking fee to use your co-working space and that's where you have all of your business meetings instead of having your clients come into your home office that would be deductible you can also write off your tolls which is another huge one especially for my people that live on the east coast i used to live on east coast and i used to travel on the parkway and the turnpike faithfully so i feel you guys on that you can also write off car washes and your dmv fees like your car registration and all of those fees that you would have to pay at the dmv [Music] so in general we at keeper tax believe that a good rule of thumb to decide whether to use the actual expense method or the standard mileage method when deducting your car expenses is unless you drive over 30 000 miles a year for work then you will save more money by claiming your car expenses using the actual expense method so i'm not going to lie to y'all the actual expense method can be a little heavy on the bookkeeping side so you need to keep a record of gas car payments insurance registration fees car services and all of those expenses if you're deducting your actual car expenses then you should track the amount the merchant the date and the purpose of each of your car expenses and this is just in case you get audited if you care about that kind of thing you want to have a log so you can give it all to the irs if they are asking for it and you also want to track your miles your business versus personal miles so you can use that number to get your business use percentage like we were talking about earlier this can honestly be pretty time consuming and if you're like me you can put it off because it's not really something that you enjoy to do luckily there are a ton of apps out there that can help you but my personal favorite is keeper tax keeper tax is an app that will automatically monitor your purchases for write-offs you would have missed and get this at tax time you can file your taxes directly through keeper tax or if that's not your jam you can seamlessly export all of the information keeper tags tracked for you and you can use it when you are filing just go to keeper tax.com to get started today so what if i just started tracking my expenses or my miles that is okay so the irs will allow you to deduct your car expenses or mileage if you can reasonably prove the number of miles you drove or the amount that you spent on your car in a given period so if you know your mileage or car expense data from august to december of a year you can see what the average monthly expenses were for that time and if you can prove that it was roughly the same through january to july of that same year then the irs will allow you to deduct the average amount for those months as well but remember it is as long as you can reasonably prove that it was that amount you can also tally up your mouse using records besides a mileage log so if you drive for uber or lyft you can look through your ride history for that mile info and i've even used my calendar like i mentioned earlier to figure out how many miles i drove in any given month it is super important for me to always add a location to my appointment so if i need to retroactively calculate my miles i could just search my calendar and tally the miles up that way and pro tip i have a i have an iphone so the way i keep mine separate is i will create a specific calendar for any business or work related appointments and i will make sure that i put all of my appointments under that calendar so if i did need to access those addresses for mileage purposes i would just select that calendar and look at all of the locations that i have saved for that month or that year so remember y'all the best way to track your expenses is at the time that they are incurred and tracking your expenses as you go will prevent you from missing out on any deductions or you could just use keeper tax and that'll be a lot easier thank you guys so much for watching this video and as always let me know if you have any questions down below and always do your own research on the irs website to get the most up-to-date and accurate information and if you would like more easy to digest tax content make sure that you give this video a like and if you're not already make sure you hit that big red subscribe button down below and make sure your notifications are on so you can get all of the alerts on any new 1099 tax videos that we post thank you guys so much for watching and i will see you in the next one

Channel: Keeper - Taxes made magical

Views: 19,299

Keywords: how to write off car expenses, actual expenses method, how to write off car expenses for business, how to write off car, how to write off a car, car tax write off, vehicle tax deduction, writing off car expenses, car tax deduction, car expenses tax deduction, actual vehicle expenses, actual vehicle expenses method, tax write offs for drivers, writing off your vehicle for business, tax deductions for cars, vehicle tax deductions, tax write offs for self employed

Id: E_mJYXfwg8g

Length: 9min 44sec (584 seconds)

Published: Tue Oct 12 2021