Tuesday Taxes & Bookkeeping: Deducting Your Vehicle Expenses

Many business owners decide to try to do their own bookkeeping, especially when they are first starting out.  It is a common misconception that anyone with QuickBooks can do bookkeeping, a misconception that Intuit helps create.  QuickBooks is an excellent tool (and I am not saying that just because I am a QB Pro Adviser), but it still requires proper set-up and at least basic accounting knowledge.  When I say set-up, I definitely don’t mean simply hitting the install button.  With QB set-up, you need to adjust the accounts, set up vendors & customers, beginning balances, sales tax and 1099 tax paths, etc.  This is where a bookkeeper is imperative.  We can get it set up properly and provide the training you need to manage things on your own after that.  A good bookkeeper will provide a follow-up services, like answering QB and accounting questions, as well as review your books.

That being said, many business owners will install their QB, and look at the options and see something like “Meals and Entertainment”, “Auto Insurance”, and “Education”.  Just because the account is there, doesn’t mean that it is a tax deductible expense that you should be tracking.  Vehicle deductions have a lot of requirements in IRS Regulations, and should be tracked on a regular and consistent manner.  There are many mileage tracking apps you can get (I personally use TripLog) that will help make your tax deduction a lot easier at year-end.  Also, try to learn what qualifies as business mileage and what doesn’t.  Unless it is a 100% company car, you don’t use it 100% for business purposes.  Tracking your mileage will help determine the appropriate personal-to-business allocation.

This is a great article by Bonnie Lee, an entrepreneur.com author, going over how to account for vehicle expenses.  I think you may find it useful.

As always, reach out to me if you need help with any of your bookkeeping needs!