Mileage Palm

iPendence Advice:

PDA Software for Vehicle Tax Deductions

By Tim Daycounter

Other links of interest - Palm Mileage software - www.quickmile.com

One of the greatest benefits to going out on your own is that you have a more tax deduction opportunities available to you. In this article we will discuss several popular tax deductions for use with your car that are easy to take advantage of, including: depreciation, leasing, and the standard mileage deductions for your business vehicle.

Vehicle tax deductions are one of the best, but one of the most neglected tax benefits available to a consultant. There are several ways to deduct vehicle expenses. The first is to purchase a vehicle and then depreciate it each year, however, for light weight vehicles there is a fairly low cap on how much you can deduct each year. Presumably, the IRS is attempting to close the tax loop hole where someone buys an expensive luxury car, and uses it to unfairly reduce his taxes. Since heavier weight vehicles are except from the cap, the unintended consequence of this limitation is that many people buy large SUVs which weigh over 8000 pounds. The IRS is in effect rewarding individuals to pollute the environment and deplete our gas reserves with a tax refund. One of the disadvantages of this method is that keeping track of vehicle depreciation can be complex, and many people need an accountant to help them.

Costs associated with leasing a vehicle are tax deductible, however, many financial advisers believe that leasing is a more costly than outright buying a vehicle, and should therefore be avoided.

Finally we will discuss the standard mileage deduction. The IRS allows you to deduct 36 (as of 2003) for each business mile that you drive. If you average 50 miles per day of business driving, that amounts to almost $5000 per year, and over $400 per month that can be deducted. This means that you can write yourself a tax free check from your business every month, based on how much you drive. The main advantage of this method is that there is no cap on the deduction, and depending upon how much you drive, the deduction eventually can exceed the value of your vehicle.

The only catch is that the IRS requires that you keep documentation of all your business miles. Before the era of Palm Pilots and Pocket PCs, people would use tedious paper ledger books, to record their miles. They would have to record the date, the starting mileage, ending mileage, and then subtract 5 digit numbers in their heads to come up with the miles driven for each business related trip, not to mention having to add add up long rows of miles to come up with end of month mileage figures, so that that they could cut a check at the end of the month

Now days with the advent of PDAs, tracking business miles has become virtually effortless. Palm mileage software packages like QuickMile (see www.quickmile.com) allow a user to keep track of business miles with just a couple of taps. If you haven't bought a Palm Pilot, this software alone is justification to go out and by a low end PDA. (Now days an entry level Palm Pilot can be bought for under $100.00.) At the end of the month, QuickMile takes care of all of your math, and will print out reports allowing you to take your deduction. It should be noted that QuickMile has other powerful features. For example: QuickMile tracks your vehicle expenses, maintenance, and fuel economy in MPG, or Liters/Kilometer.

To summarize, if you haven't started taking advantage of your car as a powerful tax deduction, you are missing out on one of the best things about being independent. Get advice from your accountant on how you can start reducing your business taxes now.