Don’t Double Dip

Proprietor can’t double dip on car expenses. This might seem like a no brainer, but if a client tells you to do it, you will need to think twice— you need to know the law. E, a sole proprietor, produced videos, and reported his business activities, including deductions on a Schedule C.

The deductions included substantial vehicle expenses, some of which the IRS denied.

Partly for the taxpayer. The IRS agreed that there was business use of a vehicle and accepted the standard mileage allowance taken for substantiated business mileage.

Note: What the IRS did not agree with and excluded was business-related depreciation and §179 expensing taken for the same vehicle. The court agreed.

A taxpayer can either substantiate the actual expenses for business use of a vehicle or use the standard mileage rate for business miles—but not both.

The standard mileage rate accounts for all fixed and variable costs, including depreciation, maintenance and repairs, tires, gasoline, oil, insurance, and other costs.