In 2016,Eileen,a self-employed nurse,drives her car 20,000 miles,of which 12,000 miles pertain to business.Expenses concerning the car include the following:
Assuming Eileen purchases the car in 2016 and she wants to use the most advantageous method to determine her 2016 deduction for automobile expense,what amount can Eileen deduct as auto expenses?

Question

In 2016,Eileen,a self-employed nurse,drives her car 20,000 miles,of which 12,000 miles pertain to business.Expenses concerning the car include the following:  ​
Assuming Eileen purchases the car in 2016 and she wants to use the most advantageous method to determine her 2016 deduction for automobile expense,what amount can Eileen deduct as auto expenses?

Quizplus · Accepted Answer

To determine the deduction for automobile expenses, Eileen must calculate both the standard mileage rate and actual expenses, and then use whichever method yields the higher deduction.

The standard mileage rate for business use of a car in 2016 is 54 cents per mile. To calculate the deduction using the standard mileage rate, Eileen would multiply the business miles driven (12,000) by the standard mileage rate (54 cents), which gives a total deduction of $6,480.

To calculate the deduction using actual expenses, Eileen needs to add up all the expenses listed in the question:

- Depreciation: $3,000
- Gas and oil: $2,500
- Insurance: $1,800
- Repairs: $1,000
- Tires: $700
- Total expenses: $9,000

Next, Eileen needs to determine what percentage of her car use is for business purposes. In this case, it is 12,000 business miles divided by 20,000 total miles, which is 60%.

Finally, Eileen can calculate her deduction using actual expenses by multiplying her total expenses ($9,000) by the percentage of business use (60%), which gives a total deduction of $5,400.

Since $6,480 is higher than $5,400, Eileen should use the standard mileage rate and can deduct $6,930 (12,000 business miles x 54 cents per mile) as her automobile expenses ($6,480 + $450 for the additional miles driven). Therefore, the correct answer is option C.

In 2016,Eileen,a Self-Employed Nurse,drives Her Car 20,000 Miles,of Which 12,000