This year, Joan drove his car 10,000 miles for business purposes and incurred $200 in parking...

Question:

This year, Joan drove his car 10,000 miles for business purposes and incurred $200 in parking fees, $400 in highway tolls, and $700 for car insurance. Compute Joan's deduction for car expenses on her income tax return, assuming she elects to use the standard mileage allowance method to compute her car expenses. Joan is self-employed.

Standard Mileage Allowance Method:

The standard mileage allowance method is used to calculate the vehicle expenses of small businesses and self-employed persons for tax-deduction purposes.

Answer and Explanation:

Unlike the actual costs method, the standard mileage allowance method does not require keeping complete records of other expenses like insurance, maintenance, and licence fees. The current standard mileage rate for a car is 57.5 cents per mile. Therefore, Joan's deductions for the car expenses are:

  • {eq}10,000 \times 0.575 =$5,750{/eq}

Therefore, if Joan employs the standard mileage allowance method, her maximum claim for a tax deduction would be $5,750.


Learn more about this topic:

Loading...
Valuation Allowances in Accounting: Examples & Analysis

from Accounting 201: Intermediate Accounting I

Chapter 4 / Lesson 5
2.5K

Related to this Question

Explore our homework questions and answers library