Can I take car depreciation on my Mesa AZ Tax Preparation?

Car Depreciation for Mesa AZ Tax Preparation

There are a few ways to depreciate a $56,732 car purchase on business taxes. The most common way is to use the straight-line method. Under the straight-line method, you will depreciate the car over its estimated useful life, which is usually five years. This means that you will be able to deduct $11,346 per year from your business taxes for five years.

Another way to depreciate a car on your Mesa AZ tax preparation is to use the accelerated method. Under the accelerated method, you will be able to deduct a larger amount of depreciation in the early years of ownership. This can be a good option if you expect your business to be profitable in the early years.

Which method you choose will depend on your specific circumstances. If you are not sure which method is right for you, you should consult with a tax advisor.

Here are the steps on how to depreciate a car on business taxes:

1. Calculate the car’s basis. The basis is the amount you paid for the car, plus any sales tax, registration fees, and other expenses you incurred in connection with the purchase.
2. Determine the car’s estimated useful life. The IRS has established estimated useful lives for different types of assets. For cars, the estimated useful life is five years.
3. Calculate the annual depreciation deduction. To do this, divide the car’s basis by its estimated useful life. In this case, the annual depreciation deduction would be $11,346.
4. Take the annual depreciation deduction each year for the car’s estimated useful life.

Here are some additional things to keep in mind when depreciating a car on business taxes:

• You can only depreciate a car that is used for business purposes. If you use the car for personal purposes, you will need to keep track of your business and personal mileage and only deduct the business mileage.
• You can only depreciate the portion of the car’s purchase price that is attributable to business use. If you use the car for both business and personal purposes, you will need to prorate the purchase price based on the percentage of time the car is used for business.
• You cannot depreciate a car that is not used for business purposes at all. If you only use the car for personal purposes, you will not be able to take any depreciation deductions.

If you have any questions about depreciating a car on business taxes, you should consult with Scott Allen EA. He would be happy to assist you with your Mesa AZ tax preparation needs.