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Itemized Deductions Schedule-A


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Old 03-22-2011, 11:09 PM
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Question Must I amend my 2008 and 2009 tax returns in order to claim the Standard Mileage Rate and Depreciation for 2010?

My wife uses a vehicle extensively for work (Field Sales Rep). She used to drive a company car, but in late 2008, that changed. The company now requires the employees to purchase a vehicle, and they reimburse a fraction of the cost.

Thinking that the amount that was NOT reimbursed was too low to claim, I did not claim this deduction in our Itemized Deductions for 2008 or 2009 tax returns. Taking a closer look, it seems that we may be able to get a decent deduction by claiming these for 2010. However, Form 2106 states that we can only claim these deductions if "You owned the vehicle and used the standard mileage rate for the first year you placed the vehicle in service".

Considering that the vehicle was purchased (and technically, placed into service) in late 2008, how would I go about claiming these deductions? Do I need to rework my taxes from 2008 and 2009, even if they do very little to the bottom line for those years? Could it be argued that the "placed in service date" was not in 2008, but on Jan 1, 2010 since we never claimed any deductions on the vehicle before 2010?

Any help would be appreciated.

Thanks,
Turk



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Old 03-23-2011, 10:45 PM
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“Considering that the vehicle was purchased (and technically, placed into service) in late 2008, how would I go about claiming these deductions?”---> Instead of figuring actual expenses, you can use the standard mileage rate of 55 cents per mile for travel during 2009; 58.5 cents per mile for travel from July 1, 2008 through December 31, 2008; and 50.5 cents for travel from January 1, 2008 through June 30, 2008. The standard mileage deduction is in lieu of deducting operating and fixed costs of the automobile. Depreciation is a component of the standard mileage rate, therefore, the basis in the automobile must be reduced by the depreciation allowed. However, if you use the standard mileage deduction, you can still deduct parking fees, tolls, interest relating to the automobile's purchase, and state and local taxes.
“ Do I need to rework my taxes from 2008 and 2009, even if they do very little to the bottom line for those years?”--->I guess you can’t get a decent deduction in 2008 as the service period of the vehicle was short. As you find omissions of car expense deductions on your original return, you MAY file Form 1040X for 2009: you might receive an additional refund. If you file all of the forms yourself, you do not have to pay. If you hire someone else to fill them out and file, you will be responsible for paying their fees.
“ Could it be argued that the "placed in service date" was not in 2008, but on Jan 1, 2010 since we never claimed any deductions on the vehicle before 2010?”--->No; as said above. You can use the standard mileage rate of 55 cents per mile for travel during 2009; 58.5 cents per mile for travel from July 1, 2008 through December 31, 2008; and 50.5 cents for travel from January 1, 2008 through June 30, 2008.



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Old 03-23-2011, 11:10 PM
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Question

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Originally Posted by Wnhough View Post
Depreciation is a component of the standard mileage rate, therefore, the basis in the automobile must be reduced by the depreciation allowed.
Thanks for the reply. I have been going through the forms, and reading up on this as much as I can. As far as the depreciation comment above, if I claim the standard deduction, I was under the impression that I could not claim depreciation as well (since it is included in the $0.50/mile standard deduction). If this is correct, I am not sure where the auto's basis would come into play (except in the case where we decide at a later time to claim actual expenses and use straight-line depreciation).



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Old 03-24-2011, 12:04 AM
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“if I claim the standard deduction, I was under the impression that I could not claim depreciation as well (since it is included in the $0.50/mile standard deduction).”--->Correct;the tax law states that a taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System, MACRS, or after claiming a Section 179 deduction for that vehicle. For all practical purposes, if you want to use the standard mileage rate for your car, then you must use it in the very first year you place it in service for your business. If you do that, in later years you can switch between the actual cost method, and the standard mileage rate, depending on which method yields the bigger deduction in any given year. However, once you use the standard mileage rate, you must use the straight-line method of depreciation if you switch to the actual cost method.
“ If this is correct, I am not sure where the auto's basis would come into play (except in the case where we decide at a later time to claim actual expenses and use straight-line depreciation).”--->As long as you use the standard mileage rate, you must not have claimed a depreciation deduction using the Modified Accelerated Cost Recovery System ,MACRS, on the car in an earlier year, including any additional first-year depreciation or bonus depreciation, 50% I mean, or any method other than straight-line for its estimated useful life. So, I guess as under IRS guidelines, your car is assigned a five-year recovery period and may be depreciated under straight line method to estimate annual depreciation expense of the car. Straight-line depreciation is one of the few methods of depreciation you can use where all of the factors in the formula are consistent and in your control. If you drive more than 50% for business, you may be able to increase your deduction by using actual expenses.



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Old 03-27-2011, 10:09 PM
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" If this is correct, I am not sure where the auto's basis would come into play (except in the case where we decide at a later time to claim actual expenses and use straight-line depreciation)."--->The standard mileage method requires taxpayers to reduce the adjusted basis of the vehicle using the following recovery rates for the total business miles driven each year. Taxpayers use the rate that applies to each year of business use. therfore t axpayers compute the depreciation built into the std. mileage rates to adjust the vehicle's basis before a sale or exchange. The adjussted basis of the vehicle affects the gain or loss when sold or exchanged; for example, for the years 2008-2009, rate per mile was $.21.



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