Hi there,
In 2022 I will be leasing two new vehicles 90% of the time the cars will be used for business purposes only. My question is which way is most effective for maximizing my deduction amount? Is it the standard deduction of 56 cents per mile or the itemized deduction?
My business structure is a sole proprietor if that makes any difference.
Is there any significant differences in tax savings to finance the cars over leasing them as well?
please list some examples so i can make the best decision for my business.
thank!
Hello Crgroadrebel88!
Thank you for your question(s). Since 2022 will be your first year to be using your leased vehicles for business, you have the option of calculating the cost of using your vehicle using either the Actual Expenses method, or the Standard Mileage method. Each method has its advantages and disadvantages. Actual Expenses may provide you with a higher tax deduction one year, and the Standard Mileage may produce a larger deduction the following year.
If you would like to use the standard mileage method, you must do so in the first year of operating your business (2022). Going forward, you have the option of switching back and forth between the two methods. You may want to calculate your expenses using both methods and then use the one that produces the larger deduction which will give you a greater tax benefit.
Please refer to the two articles below which include examples:
https://www.thebalancesmb.com/standard-mileage-rate-vs-actual-expenses-2125242
Please let me know if this answers your questions, or if I can be of further assistance.
Thank you!
Shirleyh88