Small Businesses: Company Car Vs. Personal Mileage Reimbursement In Hurricane Katrinas Wake

With gas prices at an all time high before Hurricane Katrina left her mark on our nation, most Americans were hoping that gas prices would settle down once summer passed. But gas prices have jumped as much as 80 cents a gallon across the country once Hurricane Katrina destroyed the Gulf Coast and impacted all of our lives.

While Hurricane Katrina is a horrible tragedy, it's not just affecting the Big Easy. Hurricane Katrina will impact every single American that commutes to work, takes a vacation, or shops online.

Company Car vs. Mileage Allowance

Companies and individuals alike are now concerned that the federal mileage deduction or their company's gas mileage reimbursement will no longer cover the costs of operating a vehicle for business purposes.

At the beginning of 2005, the IRS standard federal mileage reimbursement rate for business use of a personal vehicle (including vans, pickups or panel trucks) was 40.5 cents a mile for all business miles driven, up 3 cents from 37.5 cents a mile in 2004; The primary reason for the increase was higher prices of vehicles and fuel in 2004.

Christopher Tanis, District Manager of a restaurant chain in New York State travels for business to 5 different stores per week. For him, the 2005 federal reimbursement rate worked out quite well, and he opted for using his personal vehicle instead of using a company car. Now that fuel costs are so high, he's decided to re-examine the financial feasibility of mileage reimbursement.

Poor Gas Mileage Cars are Losing Value

Chris Brown; owner of Auddie Brown Superstore, an automobile dealership located in Florence, South Carolina, commented "I think [the jump in gas prices resulting from Hurricane Katrina] is ridiculous because they act like we're running out of fuel and we've got plenty."

Selling cars, the standard expense for selling each vehicle used to include a full tank of fuel when they bought a car, once the price hit $2.50 a gallon, Chris starting limiting his fuel allowance to $10. Chris explains, "Some cars take $80 worth of fuel to fill up and on a new car we're lucky if we make $80 in profit on them -- especially the new cars. Our new car profit margin is at its lowest ever. At this point we're just glad to sell the car and bring in some inventory."

Now that gas prices have gone through the roof, small business owners are working furiously to dump those 6,000 pound gross vehicle weight fuel guzzlers they bought only a year or two previously under a tax loophole which allowed small businesses to write-off most of vehicle cost in one year.

Mr. Brown has experienced this situation on a larger scale than most of us, adding "People come in to trade their larger trucks and SUV's with poor gas mileage for smaller, better gas mileage vehicles. Most consumers are not only so upside-down (owing more on the car than its fair market value) but are finding it hard to trade-in these larger vehicles. Not only they are valued less because of gas prices but people just cannot afford the fuel that would be needed to maintain these lower gas mileage vehicles."

Weighing your Options

You, too, may have to analyze your business vehicle deduction options, now that high fuel prices seem like they're here to stay. You may find that while maintaining a mileage log and claiming a car deduction or mileage allowance isn't right for your situation, the IRS will allow you to deduct actual vehicle expenses based on the percentage of business vs. personal miles. For those who use their vehicle mostly for business, minimal personal usage combined with the burden of record-keeping may justify a company car. There's no right answer for everyone. Literally, your mileage may vary. Consider your options and you'll find the way to steer yourself to the best tax advantages in these new circumstances.

Ann-Marie Patero is a freelance writer for Envision Software, publisher of Consulting Mentor, a website providing Consultant Resources and Consulting Articles to Consultants world wide. If you're a consultant, freelancer, or considering starting your own small business, the resources at Consulting Mentor will help you improve your effectiveness, profitability, and overall success.

In The News:

This RSS feed URL is deprecated, please update. New URLs can be found in the footers at https://news.google.com/news

The Journal News | LoHud.com

Which local community pays the highest taxes? It might surprise you
The Journal News | LoHud.com
ALBANY -- The village of Haverstraw in Rockland County had the highest effective property tax rate north of New York City, a report Monday found. Homeowners there paid $63.66 per $1,000 of home value in local property taxes in 2017, according to the ...
Which local community pays the highest taxes? It might surprise youRochester Democrat and Chronicle

all 2 news articles »

The Mercury News

Ireland to collect billions from Apple in back taxes
The Mercury News
LONDON — Ireland says it will begin collecting almost $16 billion) of back taxes from Apple, 19 months after the European Commission ruled that a tax deal with the tech giant amounted to illegal state aid. The Commission ordered Ireland to collect ...
Ireland expects Apple EU tax appeal to be heard in autumnReuters
Apple Will Start Paying Back Taxes to Irish Government Next Month Amid Legal Battle With European RegulatorsMac Rumors
Irish government and Apple reach deal on back taxesFinancial Times

all 26 news articles »

New York Times

Craft Distillers, Facing Lower Taxes, Invest in Themselves - The New ...
New York Times
Small craft distillers across the country have been on a spending spree since the turn of the new year. St. George Spirits, in Alameda, Calif., recently invested in more efficient pumps, new lab equipment and an automated bottling line. House Spirits ...

and more »

Tax Foundation

Seattle Proposes a New Tax on Jobs
Tax Foundation
It will be difficult for Seattle to top 2017 for the sheer number of new or higher taxes considered: a city income tax, foreign buyers' and luxury real estate taxes, soda taxes, short-term rental taxes, a higher parking tax, and a business head tax ...
Seattle's proposed tax to fight homelessness may hit Amazon hardestCNNMoney
Chill! New tax helps homeless without hurting small businessesCrosscut
Here's how Seattle's proposed tax on businesses to pay for homelessness services would workCHS Blog (blog)

all 17 news articles »

The new tax law gives rental property owners some breaks — and ...
MarketWatch
If you own rental real estate, the new tax law has changes that you need to know about.

and more »

The Denver Post

Colorado Supreme Court upholds legality of taxes for special districts, like RTD
The Denver Post
The Colorado Supreme Court on Monday upheld the constitutionality of a state law that added sales taxes to some items to benefit public transportation and cultural groups in metropolitan Denver without voter approval. The ruling by the state's highest ...

and more »

Tax Foundation

Should Bottled Spring Water Be Subject to Severance, Extraction, or Excise Taxes?
Tax Foundation
At the end of February, a bill (HB 5656) was introduced in the Michigan House to subject spring water bottlers to an excise tax of 4 percent of the wholesale price of the water they bottled. This same time last year, a bill in Maine (HP 0356) proposed ...

and more »

CNNMoney

Social Security, Medicare and taxes are on the mind of Arizona's ...
CNNMoney
In Sun City, Arizona, tax reform, Social Security and Medicare are on the minds of a powerful bloc of senior voters ahead of the special election for the 8th congressional district Tuesday.
Daily Kos Elections' presidential results by congressional district for 2016, 2012, and 2008Daily Kos
Arizona Votes Home PageArizona.Vote
Watch The Arizona 8th Special Election Like A ProFiveThirtyEight
Arizona Secretary of State
all 83 news articles »

Minnesota Public Radio News

Some Minnesotans will see taxes rise under House GOP plan
Minnesota Public Radio News
On the eve of the first hearing on his plan to conform Minnesota taxes to recent federal changes, the plan's author acknowledged some Minnesotans would pay more under the plan. "If I can get that number down under 220,000 I'd be very happy," said Rep ...
Did the new tax law cut your taxes? You might be surprisedPost-Bulletin
Tax cuts were supposed to save the GOP from Trump. Oops.Washington Post
The Great Republican Tax Cut Backfire | HuffPostHuffPost

all 25 news articles »

Forbes

After Michael Cohen Raid, How To Get Attorney Client Privilege For Your Taxes
Forbes
The government searched the office and home of President Trump's attorney, Michael Cohen, catapulting attorney client privilege into the daily news. We still do not know exactly what evidence prosecutors are seeking, although Stormy Daniels payment ...

and more »
Google News

Gambling Income and Expenses - Tax Requirements

Hit a big one? With more and more gambling establishments,... Read More

Need a Copy of Your Tax Return Information?

Taxpayers have two easy and convenient options for getting copies... Read More

State Tax Information

All states also have their own tax system. Typically there... Read More

Home Business Tax Tips

If you have recently started an Internet or home business,... Read More

Access to E-records by Taxing Authorities: A Case for Pakistan (Part I)

Background issues of access to recordsTo assess the records at... Read More

Send Your Kids To Summer Camp and Write It Off

If you paid someone to care for a child so... Read More

Are You An Innocent Victim of These Popular Myths?

Misconceptions, misinterpretations and just plain "untruths" are floating about income... Read More

Business Tax Loophole: Leasing Assets To Your Corporation

While there are many equally valid reasons to incorporate, saving... Read More

Anticipating Your IRS Refund Can Cost You Plenty

While accountants are reaching for aspirin, millions of Americans are... Read More

Tax Trap #3 -- IRS Penalties, Interest and Love Letters

As a small business owner or self-employed person, one of... Read More

E-commerce Taxation

The means and types of businesses have transformed with advent... Read More

History Of The Federal Income Tax

The powers of Congress, and the limitations set upon those... Read More

What to Do If You Can?t Pay Your Taxes

The end of tax filing extensions is quickly approaching. What... Read More

Tax Reduction Tips

In the rush to get tax returns prepared and filed... Read More

How To Get An Instant Pay Raise

As a gentleman was leaving my class recently, he wanted... Read More

Tax Trap #1 -- Waiting to Incorporate: What A Difference A Date Can Make

NOTE: This is the first in a series of 5... Read More

IRS Lock-In Letters ? What?s An Employer To Do?

Employers often ask employees to designate the amount of tax... Read More

Employment Taxes ? What Are They?

If you have employees, you are responsible for paying a... Read More

Fraudulent Tax Shelters ? KMPG Goes Down Hard

In the largest criminal tax case ever filed, KMPG has... Read More

IRS Certifies 2006 Toyota Hybrid for Clean Fuel Deduction

The Internal Revenue Service has certified the 2006 Toyota Highlander... Read More

Taxing Overseas Firms for SOX Compliance

The Sarbanes-Oxley Act, also called the Public Company Accounting Reform... Read More

Back To School ? Educators Deduct School Expenses

As teachers and students head back to school following a... Read More

Employment Taxes ? Depositing With The IRS

If your business has employees, you must pay employment taxes.... Read More

The Tax Man Cometh... To Search

You're at your office, or home, and the doorbell rings... Read More

Are You Overpaying Taxes If You Use Tax Preparation Software?

For many business owners the answer to this quandary is... Read More