Core Financial Resources
Core Financial Resources

Sign In

Avantax
Qount
Xero
Cadence HCM
Elements App: Apple App Store
Elements App: Google Play Store
July Services
Bill AR / AP
Bill Spend & Expense
Ramp

Don’t wreck your most valuable deduction

Vehicle Tax

3 min read

Vehicle expenses are one of the least understood and poorly documented deductions on most tax returns. Yet it is commonly the biggest deductions for small business owners. It is also the one that can get you in the most trouble during an audit.

Tax court trash cans are lined with failed attempts to deduct vehicle expenses. So, how do you avoid becoming another statistic?

Understand IRS Requirements

First, know the rules of the game. The tax code allows businesses to deduct actual vehicle expenses or a standard mileage deduction. While you are allowed to choose the method that produces the greatest tax benefit, switching methods is difficult or impossible so make a thoughtful decision from the beginning.

Keep Immaculate Records

The catch – The thing that most business owners find tedious and neglect to do – The thing that will cause you to fail an audit – YOU MUST HAVE A MILEAGE LOG. If your vehicle is not used exclusively for business you must track business, personal, and total miles for the year regardless of which method you choose. Going into an audit without a mileage log is a sin that IRS auditors and tax courts do not forgive. It is a simple concept: no log means no deduction. So, what must be in this log?

  1. Date
  2. Miles
  3. Starting place
  4. Destination
  5. Business purpose
All five items must be in the log. Having two or three of the five does no good. Courts have been consistent – You must prove your expense, or you get NOTHING.

Learn from other’s mistakes.

You don’t have to take it from us, learn from those that have pled their case in tax court.

  • Mr. Johnson deducted $23,000 (100% of the cost) for his pickup truck. When audited, he showed up with an Outlook calendar detailing his travel. His truck was used for all company business as well as his personal activities. His ultimate sin was not listing the business purpose of each trip. Since the court could not separate business it cost him ALL his deductions.
  • Mr. Gist had no log whatsoever and attempted to use verbal testimony support his deduction for a new $53,625 F-250. He even was able to get a customer to testify as a witness. In the end, the court ruled that his testimony fell short by not conveying each expense, use, and mileage.
  • Mr. and Mrs. Moore maintained logs containing odometer readings, mileage, destinations, and purpose of trips. Well done! Based on these logs they claimed over $31,000 in vehicle deductions. The court ended up removing 100% of their deductions because they found the logs contained far too many errors, irregularities, and questionable entries.
Notice: This generic information is not intended to be taken as tax, legal, benefits, financial, or HR advice. Since rules and regulations change over time and can vary (by industry, entity type, and locale), consult your accountant, lawyer, and/or HR expert for specific guidance.
Scott Patterson

Scott Patterson

Author

Share this page via

It only takes 10 minutes to see if we’re a good fit.

In just ten minutes you can see if it makes sense for us to work together. No pressure, no sales tactics. Tell us about what’s working and not working for you. If we can help, we’ll schedule another time to go deeper with you.

Schedule "Good Fit" Call

Related Articles

Keep reading. Never stop learning.

Vehicle Tax

Your home office's real superpower

Many small business owners think the home office is more trouble than it's worth. While that's easy to understand, don't overlook the one HUGE benefit you may be overlooking.

Scott Patterson Scott Patterson

Scott Patterson

2 min read

Vehicle Fundamentals Tax

Fundamentals: Vehicle Expenses

Vehicle expenses are one of the least understood and poorly documented deductions on most tax returns. Yet it is the biggest deduction for many small business owners. It is also the one that can get you in the most trouble...

Scott Patterson Scott Patterson

Scott Patterson

4 min read

Tax Accounting

To LLC or not? That is the question

Would forming an LLC help me pay less in tax? The question is more complicated than a Google search would have you believe. Deciding to form an LLC is both a legal question and a taxation question.

Scott Patterson Scott Patterson

Scott Patterson

5 min read
Core Financial Resources
Facebook
LinkedIn
Twitter
Anderson
1510 N Main St
Anderson, SC 29621
(864) 224-8929
Greenville
3449 Pelham Rd. Suite A
Greenville, SC 29615
(864) 626-5353
Seneca
103 Mountain View Dr
Seneca, SC 29672
(864) 882-1090

Certified Financial Planner Board of Standards, Inc. (CFP Board) owns the CFP® certification mark, the CERTIFIED FINANCIAL PLANNER™ certification mark, and the CFP® certification mark (with plaque design) logo in the United States, which it authorizes use of by individuals who successfully complete CFP Board’s initial and ongoing certification requirements.

Check the background of your financial professional on FINRA's BrokerCheck Avantax affiliated advisors may only conduct business with residents of the states for which they are properly registered. Please note that not all of the investments and services mentioned are available in every state. Securities offered through Avantax Investment Services℠, Member FINRA, SIPC, Investment Advisory services offered through Avantax Advisory Services℠,Insurance services offered through an Avantax affiliated insurance agency. 3200 Olympus Blvd., Suite 100 Dallas, TX 75019 972-870-6000.

The Avantax family of companies exclusively provide financial products and services through its financial representatives. Although Avantax Wealth Management℠ does not provide or supervise tax or accounting services, Avantax Representatives may offer these services through their independent outside business. Content, links, and some material within this website may have been created by a third party for use by an Avantax affiliated representative. This content is for educational and informational purposes only and does not represent the views and opinions of Avantax Wealth Management℠ or its subsidiaries. Avantax Wealth Management℠ is not responsible for and does not control, adopt, or endorse any content contained on any third party website.

This information is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. Investments & Insurance Products: Are not insured by the FDIC or any federal government agency- Are not deposits of or guaranteed by the bank or any bank affiliate- May lose Value

Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. Indexes discussed are unmanaged and you cannot directly invest into an index. Past performance is not a guarantee of future results.

Links provided from this web-site are strictly for informational purposes and are not an endorsement or recommendation of the site, company, content, or its sponsoring organization by Avantax or its affiliates. Firm Name provides these links as a convenience to you, and has not tested any software or verified any information found at such sites. Risks are associated with the use of software and the information available on the Internet and you acknowledge and understand these risks before using any of these services.

Avantax Investment Services℠ and Avantax Advisory Services℠ are not affiliated with Wymer Brownlee Wealth Strategies.

Copyright © 2024 Core Financial Resources.