One of the most commonly asked questions I get is regarding the business use of a personally owned vehicle. There are several ways this can be treated on your tax return and I don’t really want to get into all that. What I do want to help you do is track the right information to provide to your tax professional. This information will help determine which method will give you the best results on your tax return.
1. Mileage: There are a couple ways to do this. There are apps you can download on your phone to track your business miles. Personally, I bought a small weekly calendar I keep on the console of my car in plain sight. I found I needed the visual reminder of seeing the calendar for writing down my mileage. On January 1, (or the day you start using your vehicle for business), write down the odometer reading. Then for each business use of your vehicle, write down the beginning and ending odometer reading along with a few words stating where you went (i.e. meeting with client at ….). At the end of the year, write down the odometer reading again and total up your total business miles. Provide the beginning and ending odometer reading for the year along with your total business miles to your tax professional.
2. Vehicle expenses: This includes fuel, repair and maintenance, insurance, and registration. I like to put this information in a spreadsheet. Remember to look in all your bank accounts for this information.
Once your tax professional completes your tax return, they should tell you what information to track for next year. If you happen to buy another vehicle, start from step 1 of this article for tracking mileage and expenses until your tax professional determines the best method to handle the vehicle on your tax return.