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.
As tax time approaches, many home-based business owners begin completing... Read More
We need real tax reform and we need it now.... Read More
Practically every small business has receivables that it cannot obtain... Read More
April 15 - The most dreaded day of the year... Read More
Many small businesses complain when confronted with the expense of... Read More
Often people fall on hard times and stop paying on... Read More
Once a year Canadian taxpayers are required, by law, to... Read More
If your identity is stolen, your finances can quickly become... Read More
The Internal Revenue Service has certified the 2006 Toyota Highlander... Read More
1812The first attempt to impose an income tax on America... Read More
Media reporting of a new EU savings tax directive has... Read More
While there are many equally valid reasons to incorporate, saving... Read More
Millions of people file tax return extensions every year. The... Read More
"Depreciation." For business owners, this word is the one most... Read More
QUESTION: I have been contacted by my local city... Read More
It's a major fear for most Americans: A notice from... Read More
Anyone who is closely related to an accountant knows that... Read More
The IRS has obtained civil injunctions against more than 100... Read More
Your days as an entrepreneur and businessperson are consumed with... Read More
The federal tax code is complex. This complexity generally arises... Read More
Misconceptions, misinterpretations and just plain "untruths" are floating about income... Read More
Tilting the Tax Laws in Your Favor.In order to accelerate... Read More
Self-assessment relies on taxpayers voluntarily meeting their tax obligations. This... Read More
As everyone in the U.S. knows, we have just passed... Read More
Emerging Legal issues of Tax compliance of e-business Self-assessment system... Read More
As teachers and students head back to school following a... Read More
If you are environmentally conscious and purchase a 2005 Ford... Read More
Do you realize that some tax forms ask you to... Read More
In the latest Star Wars episode, the evil empire executes... Read More
Haven't done your taxes yet? No problem. Now there is... Read More
The Internal Revenue Service is reporting that the difference between... Read More
The 100 year old investment-banking firm of... Read More
As a small business owner, it's wise to familiarize yourself... Read More
Millions of people file tax return extensions every year. The... Read More
Emerging Legal issues of Tax compliance of e-business Self-assessment system... Read More
Six Urban Myths ? Taxation"I am proud to be paying... Read More
If you are environmentally conscious and purchase a 2005 Ford... Read More
As a small business owner, it's wise to familiarize yourself... Read More
The U.S. Department of Agriculture estimates that it costs nearly... Read More
To tax or not to tax - this question could... Read More
NOTE: This is the first in a series of 5... Read More
Practically every small business has receivables that it cannot obtain... Read More
Many small businesses complain when confronted with the expense of... Read More
Deduction of Refinance PointsAny points that you pay in the... Read More
Let's assume that you would like to begin saving for... Read More
When buying a business, how the "purchase price" is made... Read More
On June 3, 2005, the IRS released guidance on charitable... Read More
Why a Corporation Helps Save You TaxesThe Tax Rates (Notice... Read More
As an employer, you must pay employment taxes if you... Read More
The electronic transaction ordinance defines the certificated copies in which... Read More
Taxpayers have two easy and convenient options for getting copies... Read More
Statistics for IndividualsUnfortunately, the IRS increased its rate of auditing... Read More
With the massive losses caused by Katrina, the economy of... Read More
As a sole proprietor, it's wise to familiarize yourself with... Read More
"Deducting Meals and Entertainment"O.K. You've been working really hard on... Read More
It's that time again, the April 15 tax deadline is... Read More
Someone once remarked, "Next to being shot at and missed,... Read More
Donating your used car to charity is a win-win situation;... Read More
The means and types of businesses have transformed with advent... Read More
The Internal Revenue Service is reporting that the difference between... Read More
The powers of Congress, and the limitations set upon those... Read More
Deducting Your Auto ExpensesAuto deductions are a very complex topic.... Read More
So, you were pleasantly surprised to learn that you are... Read More
Should I take wages or dividends from my privately owned... Read More
Have you been thinking about incorporating your small business or... Read More
According to the IRS, taxpayers underpay their taxes by some... Read More
Tax |