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Deduction for vehicle use: how it can help you cope with rising gas prices

By on April 3, 2022 0

OOne of the alternatives to compensate for the increase in fuel prices is to try to deduct the greatest amount of taxes paid annually.

Therefore, adding expenses related to interest payments after the purchase of a vehicle is a good option in the annual income tax return that is filed.

The key to deduce

However, not all couples can take advantage of this benefit and many do not even know how this diet works.

Many people try to reduce the number of miles driven daily, but in order to do so, they must take into account certain criteria established by the Internal Revenue Service (IRS).

In most cases, independent contractors and self-employed workers use this formula.

The key to knowing whether or not to reduce taxes this way lies first in the choice between two methods when calculating mileage, which serves only one deduction.

In this sense, drivers must learn the current standard mileage rate, which is established each fall by the IRS and although in most cases it generally increases, it also decreases.

Two alternatives

Costs associated with operating a vehicle are generally taken into account by the IRS in calculating the standard mileage rate considered to fall into the category of deductible expenses.

The easiest way for individuals to use this method is to opt for the standard mileage deduction. In this case, the driver must keep a record of the number of kilometers driven for professional, medical, charitable or moving purposes and when making his annual report, this amount must be multiplied by the rate established by the IRS, as well as obtain the exact amount that can be deducted in their annual return.

Now, those who choose to deduct actual vehicle expenses must keep receipts and relevant documents related to their driving expenses, including gas and oil put into the vehicle, repairs and tires, to name a few. just a few examples.

Do not forget that, in certain cases, the authorities may require that you produce supporting documents for each of the items or services that you intend to deduct, in order to verify the reality of the expenses.

Once the exact amount of all expenses related to the vehicle is known, the owner must add them up and then multiply them by the percentage of business use to obtain the amount that can be deducted from their taxes.

It should be noted that taxpayers who have deducted the business use of their car in previous tax returns should check whether they can continue to claim it, as the law establishes that some taxpayers can and others cannot.