Question

Problem 3-6 Transportation (LO 3.3) Teresa is a civil engineer who uses her automobile for business. Teresa drove her automobile a total of 11,965 miles during 2017, of which 80% was business mileage. The actual cost of gasoline, oil, depreciation, repairs, and insurance for the year was $6,440. If required, round your answers to the nearest dollar. a. How much is Teresa's transportation deduction based on the standard mileage method? $ b. How much is Teresa's transportation deduction based on the actual cost method? $ c. Which method should Teresa use to calculate her transportation deduction? Since the method yields the larger deduction, Teresa should use the method to determine her deduction.

Answer 1

(a.)   Teresa’s transportation deduction based on the standard mileage method

Given, Total miles Drove = 11,965 Miles,

Business miles driven (80% of total Miles Drove) = 11965 x 80% = 9572 Miles

The business mileage rate was 53.5 cents per business miles driven for 2017

Therefore,

Teresa’s transportation deduction based on the standard mileage method = 9572 miles x 53.5 cent/mile

                                                                                             = $5121.02 = $5121 (Round off to nearest Doller)

(b.) Teresa’s transportation deduction based on the actual cost method

       =   Total Cost of gasoline, oil, depreciation, repairs, and insurance for Business Use (80% Given)

          = 80% of $6,440 =   $5152

(c) Since, the actual cost method yields $5152 deduction and standard mileage method yields $5121 Deduction . Hence, Actual Cost Method yields the larger deduction by $31, Teresa should use Actual Cost Method  method for Transportation Deduction .