Category: Where Do I Enter....In The Tax Program
Standard Mileage, Actual Expenses, and Depreciation (Form 4562)
If you use your car for business purposes, you ordinarily can deduct expenses related to the car or truck. To determine the amount of car and truck expenses that can be included in actual expenses or the total business expenses reported on Schedule C, Schedule C-EZ, Schedule E or Schedule F you must use one of the following two methods:
NOTE: If you use actual expenses to figure your deduction for a car you lease, there are rules that affect the amount of your lease payments that you can deduct. Armed Forces members who use their own vehicle to travel for work are entitled to deduct actual expenses or the standard mileage rate to figure the deductible costs of operating their vehicle for business purposes.
Depreciation is the annual deduction that allows you to recover the cost or other basis of your business or investment property over a certain number of years. Depreciation starts when you first use the property in your business or for the production of income. The property ceases to be depreciable when the taxpayer has fully recovered the property’s cost or other basis or when the taxpayer retires it from service, whichever happens first. A taxpayer must use Form 4562 to report depreciation on a tax return.
A taxpayer must identify several items to ensure the proper depreciation of a property, including:
|• The depreciation method for the property||• Whether the taxpayer elects to expense any portion of the asset|
|• The class life of the asset||• Whether the taxpayer qualifies for any “bonus” first year depreciation|
|• Whether the property is “Listed Property”||• The depreciable basis of the property|
To display instructions for entering the information on Schedule C, Schedule E or Schedule F in the tax program select the links below to show/hide additional information.