Save on taxes for your fleet business
If you’re a small business, managing your expenses is critical especially if you’re running a fleet. Mileage, vehicle depreciation, insurance costs, employee payroll, maintenance, leasing, and more can all add up. There are many different ways you can try to cut down on these costs throughout the year. Fortunately, when tax season rolls around, it can help you save even more money.
You may be wondering how exactly. There are two major tax codes that can come in handy – a Section 179 deduction and bonus depreciation – which allow you to offset the costs of owning your fleet vehicle.
Section 179 allows your business to write off up to a $1 million dollars worth of new, depreciable business assets purchased within the last year, like SUVs and trucks (over 6000 lbs). There are some caveats to this, such as that your business must show profit at the end of the year and it must have been used for more than 50% of your business activity.
Bonus depreciation, on the other hand, allows you to write off a certain percentage – up to 100% – of depreciable assets, and there is no maximum amount you need to have purchased. In this case, it doesn’t have to apply to just new vehicles purchased within the past year, but used vehicles too. In addition, businesses don’t have to show positive income for this, and small work vehicles can be included, such as cargo vans, regular work trucks, or smaller box trucks.
The main difference is that Section 179 gives you the ability to take all of your deduction in one year, whereas the bonus depreciation allows you to deduct the full cost of the vehicle(s) in one year. You can use both of these codes simultaneously.
Another way you can save around tax time is taking advantage of mileage deductions. For 2022, the standard mileage rate is .56 per mile for employees and self-employed. Other vehicle deductions that you can use include tolls, parking, registration fees, auto loan interest, and in some cases, maintenance/repairs, licenses, fuel, and more. Keeping track of all these components in your fleet is essential not only for managing costs but for taking advantage of tax breaks.
Federal and state tax regulations can change year by year. Consult a tax professional if you want to learn more about these tax deductions and how to best apply them to your fleet business.
If you’re a fleet operator, let Quarles help you build a custom fuel solution around your needs. We have the fueling network and products that you need to run your business – from fleet fueling cards, premium fuel options, on-site fueling, DEF, GPS fleet management, and more. Visit quarlesinc.com today or call us at 877-444-3835 to find out how we can help you.