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Business Use of Vehicles – When is Your Drive a Commute, Personal or Business Use?

As a business owner, it is essential to understand the difference between a commute, and personal or business use of your vehicle. It goes beyond just figuring out your daily expenses or calculating tax deductions. 

Knowing how to differentiate these categories can save you a lot of trouble in case of an accident, audit, or legal inquiry. It can also help you streamline your business expenses and avoid unnecessary expenses. 

In this blog post, the experts here at Orange Crush Business Consulting aim to provide an overview of these three categories of vehicle use and how you can determine which applies to your business.

Commute

A commute refers to the daily travel between your home and your regular workplace. If you work from your office or a fixed location, your commute is considered personal time and not eligible for tax deductions. However, if you have a home office and find yourself driving to a client’s location or a temporary worksite before visiting your office, that drive from home to work is considered business use and, therefore, tax-deductible.

Personal Use

Using your vehicle for personal use includes any trips made for non-business purposes. For instance, traveling to the grocery store, dropping your kids off at school, or going on vacation. It’s crucial to keep track of your business and personal mileage to avoid confusion when documenting your expenses. If you use the exact vehicle for both purposes, keep a detailed record of the time, date, location, purpose of travel, and odometer readings at the beginning and end of each trip.

Business Use

Any travel made for business purposes, such as meeting clients, attending conferences or training, and making deliveries, is considered business use. You can claim these trips as tax-deductible expenses if you can prove they were made solely for business purposes. To avoid confusion, always keep your business-related expenses separate from your personal costs, even if you use the exact vehicle for both.

Mixed Use

Distinguishing between commute, personal, and business use can get complicated, significantly when differentiating between mixed and personal use. Mixed-use refers to a vehicle that is used for both personal and business purposes, making it challenging to claim miles for tax deductions. In such cases, the IRS allows two methods for determining deductions – the actual expense method and the standard mileage rate method.

To wrap it up, understanding the categories of vehicle use is essential for every business owner. Knowing which category your travels fall under can help you save money on your tax returns, streamline your expenses, and avoid potential legal problems down the road. 

Keep detailed records of your travels, and take advantage of all deductions you are entitled to. When you properly understand how the IRS categorizes different types of vehicle use, you can maximize your tax savings and minimize potential exposure to litigation.

Need help to decipher your business expenses so you pay less tax?

Orange Crush Business Consulting is here to help!

We’ve helped businesses pay less tax, streamlined their paperwork, and helped owners spend more time doing what they love.

Click the link to schedule your one-on-one call with our team and see the difference our experts can make to your business

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