Vehicle

[JessicaH1024]

I just purchased a business vehicle that will be used 100% for business. I am a sole proprietor and this is my second vehicle. How does depreciation work? Am I able to write off loan payments? Can I deduct the cost of the entire vehicle in year 1? 

[Cindy4]

If you use actual expenses, depreciation will be used.  If you use the business mileage deduction, instead, there is a depreciation component included in the allowed standard mileage rate which changes each year.  

In TurboTax, when you enter all of the vehicle information including mileage and actual expenses, the program will calculate which is best for the current year.  As a sole proprietor with less than five vehicles, you can switch back and forth year to year.  

The loan is not an expense, but any interest you pay on it can be deducted as a current expense, if you are using actual expenses on the vehicle. 

All you need to know about vehicle deductions here.

Hope this helps!

Cindy