Deductions for Gas/Mileage

Discussion in 'Business Operations' started by Bings, Jun 24, 2004.

  1. Bings

    Bings LawnSite Member
    Messages: 35

    What do most of you do as far as deducting for gas for your tow/travel vehicle. Everyone I know in any service industry deducts the actual gas/oil charges as an expense. However when I ask my CPA (who is a ex-IRS agent) he say's the really correct way is to claim mileage. He says with the mileage allowance you are really coming out better than using the actual cash receipt. I just find it really hard to remember to keep up with mileage. I'm thinking this must be a very grey area in tax law. I remember one of our members on this forum is a CPA, maybe he will chime in here.
  2. boonhogganbeck

    boonhogganbeck LawnSite Member
    Messages: 45

    You can do either. You can keep your actual receipts for gas, oil, tires, and any other repairs and maintenance on your vehicle. You would also depreciate the vehicle. When you do this you also have to keep up with business versus personal mileage in order to form a ratio of business use to personal use of the vehicle. You can only deduct the portion allocated to business use. On the other hand, you can take the mileage deduction which factors in wear and tear and depreciation. I'll have to look it up to make sure, but I think that after you start using one method you cannot switch until you dispose of that particular vehicle. I'll check on that and try to post tonight. BTW, I am a CPA and I work in corporate tax, so I'm a little fuzzy on individual tax issues as I rarely work on them.
  3. tx_angler

    tx_angler LawnSite Senior Member
    Messages: 278

    I've been told, but check for your self, that if you lease the vehicle it's 100% deductible. Also if you have signs on the vehicle 100% of the time the mileage is 100% deductible.

    Personally I take the standard deduction for about 80% of the total miles I drive each year.
  4. missytheaccountant

    missytheaccountant LawnSite Member
    from Bama
    Messages: 45

    Listen to boonhoggenbeck....he is right. You can switch from year to year and take the most beneficial for you. I work with individual taxes and we handle this all the time. The mileage rate for 2003 was 36 is slightly more this year.
  5. Bings

    Bings LawnSite Member
    Messages: 35

    I am just starting this business as a sole proprietor and on the advice of my CPA am going to operate the rest of the year out of my personal funds and not form a company until it becomes more than just a side job. Let me make sure I am clear on this, are you saying keep up with the mileage and don't even bother with gas receipts ect.. Also I failed to mention I traded my personal vehicle for a used 2003 Diesel pickup to pull my trailer with. Does that change anything as far as deductions or depreciation.

    Thanks for your replies!
  6. boonhogganbeck

    boonhogganbeck LawnSite Member
    Messages: 45

    Missy, were are you in Bama? I'm from Birmingham.

    Roll Tide!
  7. boonhogganbeck

    boonhogganbeck LawnSite Member
    Messages: 45

    The rule states that to use the standard mileage rate you must choose that method in the first year of service for the vehicle. In later years you can choose either method. If you choose actual expenses in year one you are stuck with it for as long as the vehicle is in service.

    Regarding leases: It is usually beneficial to use actual expenses if you lease your vehicle. You get a deduction for your monthly lease payment plus a deduction for any other expenses (oil, gas, repairs, tires, etc.) However, you must include a "lease inclusion" addition to your income. This is computed using IRS tables based on the new value of your vehicle (what it would have cost you to buy it).

    I don't anything about exceptions for vehicles with permanent signage. Sorry :confused:
  8. MacLawnCo

    MacLawnCo LawnSite Bronze Member
    Messages: 1,847


    Also, keep in mind, that no matter how you take the deductions, your depreciation/milage total over the years can not exceed the purchase price of the vehicle.

    TREEGODFATHER LawnSite Member
    Messages: 203

    In my case, I usually do mileage.

    With the bucket truck, I go by actual expenses, since that truck will burn $100 a day in fuel just running the PTO for the hydraulics.
  10. gen2c

    gen2c LawnSite Member
    Messages: 6

    Are you saying if I bought a $5,200 truck, I cannot deduct more than $5,200 spread over 2 years/ $50 a week? It would make more sense if it was within 1 year or 1 filing, but over the years that just sux. With that law a person that could only afford a $1,000 dollar truck would be knee deep within first year. Thx for info, I'll be sure to buy an expensive truck lol

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