Accounting and Tax Tips and Information

written by Lauren Bakken, owner of Bakken CPA PC and co-author of the book, One-Income Household

Bakken CPA PC is dedicated to providing timely, professional, personalized service to businesses and individuals.

Tag Archives: car expenses

How Your Commute to Work May Save You Tax Dollars

Whether you drive to work or take public transportation, it could get you a deduction on your Massachusetts tax return. For tax years starting with 2006, the commuter deduction allows taxpayers to take a deduction for tolls paid through a Fast Lane account or for weekly or monthly transit commuter passes for MBTA transit, bus, commuter rail or boat. But, this does not include amounts reimbursed by an employer or otherwise.

This deduction is allowed for amounts paid over $150 but cannot exceed $750. Transportation costs are deductible in different areas of a tax return, so you must choose which area you would prefer to receive the deduction, as you cannot use the same expense twice.

It is important to know that this is an individual deduction, so it is allowed for both a taxpayer and spouse, up to a total $750 each. But, an excess deduction cannot be transferred to the other spouse. This can also be used for a dependent’s commuting expense in place of one of the spouses. The maximum allowable is two individual deductions, or $1500 total.

If your commuting expense is paid by your employer and included in your W-2 as income, then there are different rules to calculating your allowable deduction. On your W-2, the amount of the pass that exceeds $105 is included in your income. You should exclude this amount from your calculating the cost of the pass, the remainder is the amount of qualifying expenses. The amount that is deductible must still be over the $150 threshold and cannot exceed the $750. If your commuting expense is paid by a payroll reduction out of your paycheck, then the entire amount is considered eligible expenses.

In order to verify the deduction, be sure to keep a record of the monthly passes or the FastLane reports, credit card or bank statements or paystubs, whichever is applicable to your situation. It is important to keep yourself informed about tax deductions that may be out there that will help you, check with your tax preparer today to find out!

Can You Take a Tax Deduction for Your Car?

If you use your car for business purposes, you may be able to claim a deduction for the expenses you incur during the year. But, there are certain rules and requirements to have them qualify as deductible car or truck expenses.

 

All or a portion of the cost of owning and using a vehicle may be claimed as a business expense.

 

You may claim these, as long as you maintain records that can substantiate your business use and expenses.

  • You must record the vehicle make and model;
  • If the weight is greater or less than 6,000 pounds;
  • Date of purchase and evidence of amount paid;
  • The date the vehicle was placed in service for business, and
  • The odometer reading on the first and last day of the tax year.

 

Along with these records, you must also maintain an accurate log of actual business travel. This must include the mileage, date and purpose of the travel.

 

There are two methods you can use to determine your eligible deduction: standard mileage rate or the actual expense method.

 

If your vehicle is used for both personal and business purposes, the costs related to the vehicle must be divided based on the mileage driven for each purpose. If you lease a car, you must use the standard mileage rate for the entire lease period, including renewals.

 

To use the standard mileage rate, you must track your miles with a log because the rate varies for use throughout the year 2011. For all of the miles driven for business use from January 1, 2011 to June 30, 2011 the rate is 51 cents per mile. For all of the miles driven for business use from July 1, 2011 to December 31, 2011 the rate is 55.5 cents per mile.

 

To apply the actual expense method, you must determine what it costs to operate the car for the business portion of the overall use of the vehicle. Include gas, oil, repairs, tires, insurance, registration fees, licenses, and depreciation attributable to the portion of the total miles driven that are business miles. Car expenses for personal property tax, parking fees and tolls attributable to business use are deductible, whether you use the standard mileage rate or actual expenses.

 

To determine which method is more beneficial for you and if the IRS will allow you to use it, it is best to consult a CPA. This is a broad overview of a very complex topic with more regulations than listed above. But, hopefully you gained an understanding of this tricky tax topic!