Car Insurance: If deductible, you wouldn't just deduct the insurance. You
can claim deductible business auto/truck expenses in one of two ways.
- IRS
Mileage Rate: You can claim
business miles times the IRS mileage rate. IRS mileage rates for business
activities are $0.56/mile in 2014 and $.575/mile in 2015. You can add
parking and tolls to the mileage rate.
- Actual
Cost: You can claim your actual costs including depreciation times the
percentage that you use your car for business. Actual costs would include
gas, oil, insurance, repairs, etc. Payments on a note would not be
deductible. The cost of the vehicle would be deducted through depreciation
instead (or lease deducting lease payments if you lease it.)
(For
planning purposes, the mileage rates go down in 2016 to $0.54 for
business use, and $0.19 for medical and moving purposes. The charitable rate stays the same.)
Where
to Deduct:
- If you are
an employee, they are a miscellaneous itemized deduction. Miscellaneous
itemized deductions are only available if you qualify to itemize and only
to the extent that they exceed 2% of your Adjusted Gross Income.
Example: If your Adjusted Gross
Income is $50,000, only miscellaneous itemized deductions over $1,000 are
deductible. Because of this, many items deductible as miscellaneous
itemized deductions have no tax value because the taxpayer doesn't
itemize, or because they are lost in the 2% of adjusted gross income
limitation.
- If you are
self-employed, these expenses would be business expenses on Schedule C.
Cell Phone: The
costs of a cell phone may be a business expense, but only the additional costs
in using a cell phone for business are deductible. The Tax Court has several
interesting cases on this. In one case, the taxpayer paid a flat rate on a
phone used for business and personal calls. The court held that as he paid a
flat rate for his personal phone and incurred no additional charges for
business use, he has no deduction. (Ritchie, TC Summary Opinion 2005-181).
For
an employee, if deductible, they would be entered as a miscellaneous itemized
deduction for employee business expenses.
Example
from Ritchie: "Petitioner’s cell
phone was a personal phone that he also used for business calls. Petitioner
testified that he paid a flat rate, regardless of phone usage. Therefore, aside
from the personal expense of the phone, which is rendered nondeductible under §
262, he incurred no additional charge for business use."
