Daycare Tax Tips

More than one car and other business auto concerns

Alison responds to a provider's questions

A family child care provider writes:

> Is a business auto any auto used for business purposes (grocery etc)? We own 2 cars. I have taken both cars at different times to do business related shopping, however, I did not keep records on what outings I took what car. Is that a problem? I also did not write down what our mileage at the beginning of 08 was for either of the vehicles. Any suggestions? Is that a problem when figuring our mileage deductions?

Yes, in answer to your first question. A business auto is any vehicle driven for business purposes. When you use more than one car, you should keep track of which one is used for which business trips. A business trip is one where the primary purpose of the trip is business-related. Business mileage for each car is reported separately on your income tax return. Since you didn't do this last year, I recommend that you add up your business miles and make your best guess as to the number of miles driven in each car.

Write down your odometer mileage on January 1 every year to help you accurately determine how many total miles were driven in that vehicle during the year. Total miles means all miles driven, both business and personal. Since you didn't do that at the beginning of last year, you will have to estimate your total mileage as best you can. It may help to pull out any auto maintenance receipts you saved from last year or the year before, as the mechanic should have recorded your odometer reading at the time of service. One way or another, you must estimate total miles driven for both your business autos last year.

If you use the actual expense method to calculate your auto expense deduction, having an accurate total mileage figure is very important. Business miles divided by total miles determines a vehicle's business-use percentage for the year, which determines how much of your vehicle expenses are deductible.

If you end up using the standard mileage rate, as most of my clients do, the total mileage figure won't matter as much. However, you still need to determine your business-use percentage if you want to deduct a portion of your auto loan interest and/or vehicle tax. These costs, as well as business-related parking fees and tolls, can be added to a standard mileage rate deduction.

Last updated 13 August 2013

Posted on 2009-01-27 00:28:04