Owning and managing a fleet involves many different activities. As a result, when the time comes for fleet owners and managers to prepare and submit their tax returns, a very common phenomenon is seeing some of them fail to include the sum of expenses that could contribute towards greater tax deductions. So, we’ve tried to put together a list of some of the most commonly missed tax deductions for fleet owners.
Of course, we would recommend that you don’t rely exclusively on this article to put together your own list of deductible expenses. Depending on your situation and type of business, there could be more.
“Standard mileage rate” and “actual expenses” tax deductions
These are the two different ways you can use to deduct the expenses of any vehicle used for business purposes. If you use your vehicles for personal purposes as well, you’ll need to categorize your trips accordingly; and submit only those travelled for business purposes to the IRS.
In general, you should know that the “standard mileage rate” method takes into account only the miles travelled for business purposes; and multiplies them with a rate that might change every year.
The “actual expenses” method takes all of the vehicle’s expenses into account and adds them to the total business miles travelled, so that the deductible amount is calculated. That includes expenses from gas, oils and repairs to insurance, registration fees and licenses.
It is important to note here that you may not be eligible to use both methods as you need to meet some specific criteria. If you’re indeed able to use both methods, we would suggest calculating the deductible amount using both of them and then go for the one that deducts the larger financial amount from your taxes. We’ve also developed a brief guide that points out some differences between the two methods, in case you want to have a look.
Depreciating belongings
All the fixed assets used for business purposes that depreciate with the passage of time, may be able to be deducted. To be specific, such belongings include
- machinery
- equipment
- buildings
- vehicles
- furniture
There are two main methods to calculate the depreciation:
- Accelerated Cost Recovery System (ACRS)
- Modified Accelerated Cost Recovery System (MACRS).
You may use the former one if your property was placed in service before 1987 and the second if it was placed in service after 1986. For more information about depreciation you can check out the IRS website.
Casualty, disaster and theft losses
You are eligible to deduct casualty and theft losses regarding your assets, if they have suffered damage beyond logical repair, by a federally declared disaster. Such disasters include
- floods
- hurricanes
- tornados
- fires
- earthquakes
- volcanic eruptions
As for theft, the amount of loss is the adjusted basis of your property, since the market value of the property is zero once theft occurs. Keep in mind that the taking of your property must be illegal and with criminal intent, under the laws of your state. You may find more information about casualties and thefts on the IRS website.
Vehicle leasing
If you’re leasing business vehicles, you can deduct leasing costs from your taxes. However, if you choose to do so, you will not be able to use the standard mileage rate. That said, since a lot of fleet owners falsely think they can do both at the same time, the IRS has clarified why it cannot be done. For more information about how you can deduct taxes with vehicle leasing and what to consider before leasing your vehicles instead of buying them, you may take a look at a comprehensive guide our team has prepared.
Keep track of everything
To wrap it up, these were only some of the commonly missed tax deductions. As you can understand, including every single tax deduction would not fit in this article; and it would take ages to read. But, we believe we have included the most helpful deductions. The ones that a lot of fleet managers or owners don’t pay attention to.
When it comes to keeping track of your fleet’s mileage and expenses, you may also consider subscribing with a vehicle management service; it can make your life easier in a lot of different ways. For example, Veturilo can help you create mileage reports and categorize the trips of your vehicles as “business” or “personal”. You also have access to very useful data about your vehicles, such as
- fuel levels
- battery levels
- coolant temperature
and data about drivers performance like
- the speed of the vehicle
- hard braking
- fast accelerations
The best part about it is that you can get notifications about nearly everything, on the screen of your mobile phone or desktop device. If you feel like such a service could come in handy, why don’t you see how it works ? And remember to check out our free demo. All you have to do is register, for free!
