Sarah, an independent consultant, purchased a new car at the beginning of the year. During the year she drove a total 20,000 miles, of which 12,000 related to meetings with clients and other business-related driving. Sarah incurs the following expenses related to both business and personal use:Gas and oil$6,000Repairs and maintenance2,500Depreciation3,000Insurance 1,800Total$13,300She also spent $200 on parking and tolls that were related to business. What are the possible amounts of Sarah's deductible transportation expenses?
What will be an ideal response?
Actual expense method:
| Business portion of operating expenses $13,300 × 12,000/20,000 miles = | $7,980 |
| Business tolls and parking | 200 |
| Deduction under actual expense method | $8,180 |
Standard mileage method:
| 12,000 miles × .58 per mile = | $6,960 |
| Business tolls and parking | 200 |
| Deduction under standard mileage method | $7,160 |
She may take the greater of the two. In this situation, the actual expense method will provide the greater deduction.
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