Good News for self-employed taxpayers. In an effort to recover more taxes, the IRS is shifting away from auditing self-employed taxpayers (those who file Schedule C on their Form 1040. The IRS is instead focusing on auditing pass-through firms like partnerships, S corporations and the like with more complicated tax issues and higher deficiencies.
Bad news: estimated business mileage trap. The tax rules to deduct vehicle use are strict. You must prove your miles driven, time and place and business purpose. Estimating business mileage is hazardous to your deductions! In a recent Tax Court case, the Court denied deductions for estimated mileage where no destination was identified.
My Advice: Use your calendar on your phone to record destinations but be sure you can also establish mileage and business purpose.
Big pickup – big tax break. In the last WealthWISe, I discussed the tax break for large SUV’s. However, certain large pickup trucks placed in service in 2016 qualify for the largest deduction of any vehicle, a one hundred percent write-off.
Ordinary Vehicles. Depreciation for ordinary passenger autos put in service in 2016 hasn’t changed. The first-year maximum deduction remains at $11,160 for new vehicles and $3,160 for used ones. The second- and third-year caps are $5,100 and $3,050. After that, it is $1,875 a year.