Chelsea,who is self-employed,drove her automobile a total of 20,000 business miles in 2014.This represents about 75% of the auto's use. She has receipts as follows: Chelsea has an AGI for the year of $50,000.Chelsea uses the standard mileage rate method. After application of any relevant floors or other limitations,she can deduct
A)$10,900.
B)$11,900.
C)$11,750.
D)$12,900.

Question

Chelsea,who is self-employed,drove her automobile a total of 20,000 business miles in 2014.This represents about 75% of the auto's use. She has receipts as follows:  Chelsea has an AGI for the year of $50,000.Chelsea uses the standard mileage rate method. After application of any relevant floors or other limitations,she can deduct
A)$10,900. 
B)$11,900. 
C)$11,750. 
D)$12,900.

Quizplus · Accepted Answer

Chelsea's total business miles were 20,000 which she drove for business purposes, representing 75% of the car's total use for the year. Therefore the total miles the car was driven for the year = (20,000/75%) x 100% = 26,667 miles.
Using the standard mileage rate for 2014, which is 56 cents per mile, Chelsea's deductible mileage expenses are 26,667 x $0.56 = $14,933.
However, Chelsea cannot deduct the portion of her mileage expenses that represents personal use. Since the business use of her car was 75%, the personal use was 100% - 75% = 25%. Therefore, Chelsea can only deduct 75% of her total mileage expenses: 75% x $14,933 = $11,200.
Since the above expense exceeds AGI floor, Chelsea can deduct it in full. Therefore, the correct answer is $11,900 (Option B).

Chelsea,who Is Self-Employed,drove Her Automobile a Total of 20,000 Business