If the taxpayer used their personal vehicle for business purposes, they can generally deduct expenses related to the business use of the vehicle.
- If they chose to use standard deduction in the vehicle's first year, they can switch to reporting actual expenses in subsequent years. However, once the election is made to report actual expenses, they cannot switch to standard deduction.
- If the vehicle is used for both business and personal purposes, the business portion of the expenses will be determined according to the percentage of business mileage to total mileage. Thus, it is incumbent on the taxpayer to keep accurate logs showing business, commuting, and personal mileages so the business percentage can be accurately determined.
- If the taxpayer's business uses five or more cars, they must report actual expenses rather than standard deduction, with some exceptions. See Publication 463 for info on the exceptions when the business uses multiple vehicles.
- For a leased vehicle, if the taxpayer started using standard mileage they must use standard mileage over the life of the vehicle. They cannot switch to reporting actual expenses.
IRS Publication 463 is an invaluable and authoritative resource to assist you in accurately calculating deductible vehicle expenses on Schedule C.
In TaxSlayer ProWeb, if the taxpayer has elected to report actual vehicles expenses, you'll make the entries for the vehicle under the Depreciation expense category. (The Car And Truck Expenses menu is used for entering standard mileage information.)
Entering a vehicle reporting actual expenses
To report vehicle expenses in Schedule C in TaxSlayer ProWeb, from the Federal Section of the tax return select:
- Schedule C - Begin the first Schedule C or click + Add a Schedule C if creating a new one.
- Assets - Enter the information about the vehicle:
- Description - Enter a description that will make it easy to determine which vehicle this is when looking at the return's statement of depreciation.
- Date placed in service - If placed in service in a prior year, be sure to enter the prior year section 179 deduction, accumulated depreciation, and, if applicable, special depreciation taken.
- Cost - The cost of the vehicle equals its invoice cost plus any additional transportation fees incurred.
- Percentage of business use - If the vehicle is used for both business and personal reasons, enter the percentage of business use. This percentage is used to determine the amount of allowable section 179 deduction since this deduction is taken only on the cost of the vehicle allocated for business use.
- Section 179 deduction - If the taxpayer wishes to take the Section 179 deduction, enter the allowable amount of the deduction calculated based on the cost of the vehicle times the percentage of business use. Note that if the percentage of business use is 50% or less, the taxpayer cannot take the section 179 deduction.
- Prior year special depreciation - If you're entering information about a vehicle purchased in a prior year, enter here the amount of special depreciation taken in the prior year.
- Accumulated depreciation - If you're entering information about a vehicle purchased in a prior year, enter here the amount of depreciation that has been deducted so far.
- Depreciation method - Specify the depreciation method appropriate for the vehicle. For passenger vehicles, trucks, and vans that's generally "MACRS 5 YR 200%". Alternatively, the taxpayer can elect either "MACRS 5 YRS 150%" or straight-line, however if one of these elections is made the taxpayer must use that same election for all property in the same class placed in service in the year.
- Useful life - 3 years is the usual useful life for passenger vehicles and light trucks. See the "Table of Class Lives and Recovery Periods" in IRS Publication 946 for assistance if you're otherwise unsure what to enter here.
- Mid-quarter property - Check this box if the mid-quarter convention applies to the vehicle. The mid-quarter convention applies when more than 40% of the total depreciable bases of all MACRS property placed in service during the entire year (excluding (a) nonresidential real property, (b) residential rental property, (c) railroad grading or tunnel bore, (d) property placed in service and disposed of in the same year, and (e) property that is being depreciated under a method other than MACRS) was placed in service in the last three months of the year.
- Opt out of special depreciation - Special depreciation is taken by default. Check this box if the taxpayer wishes to opt out of special depreciation. (Of course, neither regular nor special depreciation will calculate if the vehicle is being expensed entirely using the section 179 deduction, as the vehicle's basis will be zero.)
- Listed Property Information - In the drop down menu, select the listed property category this vehicle falls under, then enter the mileage and expense info:
- Total business/investment miles - Enter the amount of business miles.
- Total commuting miles driven - Enter the amount of commuting miles, i.e., mileage driving to and from the taxpayer's place of residence and their place of work. (Note that conducting business while commuting doesn't change the character of the trip - it's still commuting.)
- Total other personal miles driven - Enter the amount of miles not included in business or commuting.
- Actual Expenses - Enter the dollar amount of vehicle expenses, including gas, oil, repairs and parts, insurance, lease payments, license and registration fees, garage and parking fees or rent, and tolls. (The amount that carries to Schedule C will be the actual expenses multiplied by the ratio of business miles to total miles.)
- Acquired before 09/28/2017? - This is answered No by default. Change to Yes if true. (This question relates to the date when special depreciation provisions in the Tax Cuts & Jobs Act of 2017 went into effect.)
- Informational check boxes - Check these as appropriate:
- The vehicle was used by a rural mail carrier
- The vehicle was available for personal use during off-duty hours
- The vehicle was used by more than 5% owner or related person
- Another vehicle was available for personal use