Mercedes is an employee of MWH company and drives her car 12,000 miles a year for business and 3,000 miles a year for commuting and personal use.She is not reimbursed by her employer.She wants to claim the largest tax deduction possible for business use of her car,before any limitations on itemized deductions.Her total auto expenses for 2016 are as follows:
Mercedes's total 2016 deduction for automobile use is:

Question

Mercedes is an employee of MWH company and drives her car 12,000 miles a year for business and 3,000 miles a year for commuting and personal use.She is not reimbursed by her employer.She wants to claim the largest tax deduction possible for business use of her car,before any limitations on itemized deductions.Her total auto expenses for 2016 are as follows:  ​
Mercedes's total 2016 deduction for automobile use is:

Quizplus · Accepted Answer

To calculate Mercedes's tax deduction for business use of her car, we need to determine what percentage of her total annual mileage is for business purposes.

Total annual mileage = 12,000 miles (for business) + 3,000 miles (for commuting and personal use) = 15,000 miles

Percentage of miles for business purposes = 12,000 miles ÷ 15,000 miles = 80%

Next, we need to calculate Mercedes's total expenses for the year. This includes both fixed and variable expenses.

Fixed expenses:
Depreciation = $2,800
Insurance = $1,800
Registration fees = $200
Total fixed expenses = $4,800

Variable expenses:
Gas and oil = $1,500
Repairs and maintenance = $500
Total variable expenses = $2,000

Total expenses = fixed expenses + (variable expenses x percentage of business use)

Total expenses = $4,800 + ($2,000 x 80%) = $6,800

However, there is a limitation on the tax deduction for auto expenses based on the taxpayer's income. In this case, Mercedes's income is not provided, so we cannot calculate the limitation.

Therefore, the largest tax deduction possible for business use of her car, before any limitations on itemized deductions, is $6,818, which is the total expenses of $6,800 plus the parking fees of $18.

Mercedes Is an Employee of MWH Company and Drives Her