For Business Owners & Self-Employed Individuals

Disclaimer: This material is for informational purposes only. Tax deductions depend on your individual circumstances. Please consult your tax advisor before claiming deductions.

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🚗 1. Vehicle Depreciation (Major Tax Savings Opportunity)

You may be eligible to deduct up to 100% of your vehicle cost through depreciation, depending on business use, vehicle weight, and purchase date.

✅ Bonus Depreciation Eligibility (2025)

Your vehicle may qualify for bonus depreciation if:

• Purchased after January 19, 2025
• Used for business purposes
• Meets IRS weight and usage requirements

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📊 Example 1: Heavy Vehicle (Over 6,000 lbs)

Detail	Amount
Business Use	100%
Vehicle Weight	Over 6,000 lbs
Vehicle Cost	$48,000
2025 Deduction	$48,000

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📊 Example 2: Passenger Vehicle (Under 6,000 lbs)

Detail	Amount
Business Use	50%
Vehicle Weight	Under 6,000 lbs
Vehicle Cost	$48,000
First-Year Depreciation Limit (2025)	$20,200
Available Deduction	$10,200

⚠️ If your vehicle is used for both business and personal purposes, only the business-use percentage is deductible.

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🛠️ 2. Additional Vehicle Expenses (Beyond Depreciation)

In addition to depreciation, you may deduct the business portion of the following expenses:

• Gasoline, oil, and lubrication
• Repairs and maintenance
• Tires
• Auto insurance
• State and city licenses
• Motor club memberships
• Parking fees and tolls (business use only)

📌 Important Notes

• If your vehicle is used 80% for business, you may deduct 80% of these expenses
• The vehicle cost itself is recovered through depreciation, not expensed immediately
• You must choose one method per vehicle per year:
  • Actual expenses OR
  • Standard mileage rate (not both)

🗂 Recordkeeping Required:
Mileage logs, receipts, and documentation of business use

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✈️ 3. Business Travel Deductions

Expenses incurred while traveling away from your tax home for business purposes may be deductible.

✅ Deductible Travel Expenses

Category	Examples
Transportation	Airfare, train, taxi, rental car, mileage
Lodging	Hotel, motel, accommodations
Meals	50% deductible
Other	Tips, laundry, business calls
Logistics	Shipping baggage or materials
Vehicle Costs	Parking fees and tolls

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🧮 Business vs. Personal Travel Allocation

• Primarily business trip:
  • Transportation to/from destination is fully deductible
  • Lodging and meals must be allocated based on business days

Example:
3 business days + 2 personal days → deduct 3/5 of expenses

• Primarily personal trip:
  • Transportation is not deductible
  • Business-related expenses during the trip may still qualify

🌍 Foreign travel is subject to special allocation rules

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🍽️ 4. Business Meals Deduction (50%)

Business meals are deductible if they are ordinary, necessary, and business-related.

✔️ Requirements

• Meal with a client, customer, employee, or business associate
• Clear business purpose
• Not lavish or extravagant

💰 Deduction Rules

• 50% of cost is deductible
• Includes food, beverages, tax, and tips
• Applies to:
  • Business meetings
  • Travel meals
  • Employee-related meals

🗂 Records Must Show:

• Amount
• Date and location
• Business purpose
• Business relationship

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🏠 5. Home Office Deduction

You may qualify if you use a specific area of your home exclusively and regularly for business.

✔️ Qualifying Uses

• Principal place of business
• Meeting clients or customers
• Administrative or management activities

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🧮 Two Calculation Methods

1. Actual Expenses Method

Deduct the business portion of:

• Rent or mortgage interest
• Utilities
• Insurance
• Repairs
• Depreciation

📐 Business % = Office square footage ÷ Total home square footage

Excess deductions may be carried forward to future years

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2. Simplified Method

Rule	Amount
Rate	$5 per square foot
Max Size	300 sq ft
Max Deduction	$1,500

⚠️ You cannot deduct actual expenses or depreciation using this method

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📄 Reporting

• Form 8829 (Actual Method)
• Schedule C (Form 1040)

Employees generally cannot claim the home office deduction (2018–2025)

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📌 Final Notes

• Proper documentation is critical for all deductions
• IRS rules vary based on facts and circumstances
• Always consult with your tax professional before filing

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