Question

33. (4 points) Alberto works as an independent contractor in the clothing business as a buyer for several large retail chains. During 2019 he incurred the following expenses for transportation: Gas and oil 4,100 Repairs 450 Insurance 700 Ticket for speeding 180 License 350 Toll Road Fees (for business) 125 He purchased his car on November 16, 2018 for $32,000. During 2019 he drove the vehicle 28,000 miles in total including 22,400 miles for business. He had a very good year, so he wants to claim every possible deduction for his transportation. Be sure to show your work! If Alberto uses the Automatic Mileage Method, his transportation deduction is $ If Alberto uses the Actual Cost Method, his transportation deduction is $

Answer 1

Answer :

1. If Mr. Alberto using Automatic / Standard Mileage method

This is a simple method for calculating business use of car. It does not require to see individual purchase and regular expenses. Need to determine percentage your mileage the applies your business and after that simply multiply that figure by the standard mileage rate.

As per internal Revenue service (IRS) 2019 released standard mileage rate are :

58 cents per miles for Business miles driven

Total Miles traveled	28000	miles
For Business purpose	22400	miles
So, Total Business miles driven are	22400	miles
Standard mileage rate are	0.58	Cents
Total cost under standard cost are (Total business miles multiply with standard mileage rate)	12992	$

Answer 2 If Mr. Alberto using Actual cost method

It refer add up all the money actually spent in the operation of your vehicle.You can multiply this by percentage of the vehicle's business use.

	Miles	Percentage (%)
Total Miles traveled	28000	100%
For business purpose	22400	80%
For personal purpose	5600	20%
Actual expense spend for business purpose only	Amount $
Toll road fees (For business )	125
Actual expense spent for business and personal purpose	Amount $
Gas and oil expense	4,100
Repairs	450
Insurance	700
Ticket for speeding	180
License	350
Total	5,780
For business expense is 80% of the total expense spent	Amount $
Total expense business and personal	5780
So, Business expense (80% of above)	4624
Cost of business as per actual cost method	Amount $
Total business expense	4624
Only business purpose	125
Total deduction business cost as per actual cost method	4749