Penny owns her own business and drives her car 12,000 miles a year for business and 3,000 miles a year for commuting and personal use.She wants to claim the largest tax deduction possible for business use of her car.Her total expenses related to her auto for 2013 are as follows:
$\begin{array}{lr}
\text { Gas, oil, and maintenance } & 4,050 \
\text { Insurance } & 720 \
\text { Interest on car loan } & 500 \
\text { Depreciation } & 2,960 \
\text { License } & 80 \
\text { Parking fees and tolls (100\% business) } & 130
\end{array}$
Penny's total deduction for business use of the auto in 2013 is:

Question

Quizplus · Accepted Answer

To calculate the deduction, first determine the business use percentage: 12,000 business miles / 15,000 total miles = 80%. Then, apply this percentage to the total expenses (excluding parking fees and tolls, which are fully deductible): $4,050 + $720 + $500 + $2,960 + $80 = $8,310. 80% of $8,310 is $6,648. Add the parking fees and tolls of $130 for a total deduction of $6,778. However, the standard mileage rate for 2013 is $0.565 per mile, so 12,000 miles x $0.565 = $6,780. Adding $130 for parking fees and tolls gives $6,910. The largest deduction is the actual expenses method, totaling $7,310.

Penny Owns Her Own Business and Drives Her Car 12,000