Question

This year, Janice Smith drove her personal car 3,600 miles for business purposes and incurred $180 in parking fees, $210 in highway tolls, and $350 for automobile insurance premiums. Compute Janice's deduction for automobile expenses on her current year tax return, assuming all of the above expenses are valid and she elects to use the standard mileage allowance method to figure her automobile expenses. Janice is self-employed.

Answer 1

The question has been sold with the use of tax rules as applicable for the year 2018, the return for which will be filed in the year 2019.

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As per the applicable rules, the taxpayer can claim a deduction of 54.5 cents per mile (for the Year 2018) towards automobile expenses (incurred for business purposes) if he/she elects to use the standard mileage allowance method. The actual amount of automobile expenses incurred by the taxpayer cannot be claimed as a deduction in such a case.

Based on the above rule, the total amount of (automobile expenses) deduction available to Janice on her current year tax return can be arrived as below:

Janice's Deduction for Automobile Expenses = 3,600*.545 = $1,962 (answer)

Therefore, Janice can claim a maximum deduction of $1,962 for automobile expenses if she elects to use the standard mileage allowance method.