The cost of owning a business can be expensive, albeit rewarding. Many business owners reduce their overall company costs by claiming a number of different credits and deductions available. The government has made strides as of late to increase the tax benefits offered to company owners, and the tax breaks for business vehicles were recently updated.
The tax rules pertaining to business use of a vehicle apply to autos purchased after September 8, 2010, and prior to January 1, 2012, according to The Wall Street Journal.
Small business owners should ensure they fall under the guidelines of what they may deduct. For example, if individuals use the vehicle for both business and personal use, they may only claim a portion of the overall car expenses that were incurred during business use. Consumers may also want to speak with a tax preparer
about what constitutes business versus personal use to avoid simple errors. For example, many consumers mistakenly think that commuting from home to work is a business expense, but in actuality it counts as personal use, the Journal reports.
When calculating the deduction, consumers have two options and both may require special consideration. They may either deduct a flat $0.51 per business mile for the 2011 tax year, or claim the depreciation costs plus the price of maintenance, gas, car insurance and additional costs, such as tolls and parking, the news source explains.
The government recently changed the rules regarding depreciation, allowing consumers who purchase a car weighing more than 6,000 pounds to deduct 100 percent of the vehicle’s business costs during the first year, the news source reports. Business owners who plan to go green may also be eligible for a tax credit of up to $7,500 on plug-in electric motor vehicles.
There are a number of different rules and regulations pertaining to business credits and deductions that can help individuals save significantly. For example, the Section 179 provision allows businesses to deduct up to $500,000 in qualifying equipment purchased in 2010 and 2011, according to CNN Money. Small business owners who pay at least half of their employee’s health insurance may also qualify for tax breaks. Owners may benefit from speaking with a tax professional about the different options and qualifying criteria available to them.
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