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Rakhi Vasavada
Rakhi Vasavada, Financial and Legal Consultant
Category: Finance
Satisfied Customers: 4543
Experience:  Graduated in law with Emphasis on Finance and have have been working in financial sector for over 12 Years
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I have a young client who has been so far very successuful

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I have a young client who has been so far very successuful in the oil fields of West Texas. My question is since he drives maybe 3 or 4 hundred miles per day, checking on his downhole pumps and visiting other well sites persuing business, in your expert opinion, should he take mileage on his truck or would he be better off depreciating and claiming actual expenses. He wears out a truck in a fairly short period of time because of these rough lease roads. He does try to make a truck last at least a year.

Rakhi Vasavada :

Dear Friend,

Hello and welcome. Thank you for providing us an opportunity to help.

Rakhi Vasavada :

To depreciate and take actual expenses OR use mileage ? This is a question most small business owners encounter and there is no easy answer to this in some situation.

However, in your case, the straight forward answer would be YES-- It is better to take actual expenses and depreciate the vehicle given the high amount of use.

Rakhi Vasavada :

However, there are few things you need to know. This method -- i.e. depreciating and claiming actual expenses requires more accurate record keeping.

If you're using the actual expense method you can deduct all the expenses of operating the vehicle. That includes gas, repairs, insurance, lease payments, depreciation, etc. But you'll have to maintain records and keep the receipts of all the expenses.

If you lose the receipts for , say for example, gas expenses in a month ? If you're audited the IRS can disallow the expenses. And if you're audited there's a very high probability the IRS will ask for your car logs, expense documentation, etc. for all business vehicles. Agents know most taxpayers are lax in this area and most of the time an agent is almost guaranteed to disallow some deductions.

Secondly, you can only deduct the portion of the expenses incurred for business use

Rakhi Vasavada :

If you can take care of this, then yes, claiming depreciation and other actual expenses is certainly a better option in your case.

Rakhi Vasavada :

I hope this helps.. You may please rate this positively if this helps or revert with a reply if you need further assistance.

Warm Regards,

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