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Small Business Tax Deductions – How Much Car Expense Is Tax Deductible?

If you use your vehicle in your small business or self-employment activity, how much car expense can you write off on your income tax return? Read on to find out.

Vehicle deductions operate on this basic principle: your car-related expenses are tax deductible to the extent you use the car for business purposes. This statement raises the question: how do you determine the business use percentage of your car? Answer: mileage. You must keep a vehicle mileage log to determine the business use percentage. You divide business miles by total miles and the resulting percentage is the extent to which you can deduct your car expenses.

Here’s an example: you drive your car a total of 10,000 during the year. Of those 10,000 total miles, 5,000 miles were for business purposes. Since 50% of your miles were business miles, 50% of your vehicle expenses can be deducted as a business expense.

This leads us to the next question: what car expenses can be deducted? Answer: you have two options. Option One is known as the Actual Expense Method – you deduct the actual expenses of operating your vehicle, such as gasoline, oil, repairs, maintenance, tires, insurance and lease payments. A portion of the purchase price is also included in this list via the annual depreciation expense and/or the Section 179 deduction. You add up all these actual expenses and multiply that amount by your business use percentage. In the example above, if you had $10,000 in total actual annual expenses, your deduction would be 50% of that amount, or $5,000.

Option Two is known as the Mileage Method – you take the number of business miles and multiply that by an IRS-approved standard mileage rate. This rate is usually in effect for the entire calendar year. For example, in 2010 the rate was 50 cents per mile. So, in the above example, if you drove your car 5,000 miles for business, your deduction would be $2,500 (5,000 miles x.50/mile).

One more question: should you use the Actual Expense Method or the Mileage Method? Answer: it depends. You should run the numbers both ways in the first year and see which approach results in the higher tax savings. You can pick either method in Year One. Should you start with the Actual Expense Method, you must stick with it. If you start with the Mileage Method you are allowed to switch over to the Actual Expense Method. Either way, you can get a nice deduction for the business use of your car, so be sure to keep good records and an accurate mileage log.

5 Strategies to Get ‘Unstuck’ and Take Your Business to the Next Level!

If you’ve ever watched a turtle slowly cross the road to get to the other side, you know it’s a long journey across. As a business consultant, I talk to small business owners regularly who are at a crossroad and frantically want to take their business to the next level, but finding it difficult to get ‘unstuck. ‘

At a recent business conference in Washington DC, I met Nell Merlino, CEO of Count Me In and creator of the Make Mine a Million initiative. In our conversation about how to avoid being ‘stuck,’ she stated, “To avoid being stagnant, it is imperative for women entrepreneurs to think BIGGER. To think and dream bigger will enable you to take your business to the next level!”

If your business has been a bit stagnant lately, here are 5 strategies to overcome your fear and get unstuck:

Conduct a SWOT Analysis
To move forward, you need to determine where you are at in your business. A SWOT Analysis is a great way to access the state of your business. When conducting a SWOT, you are analyzing your businesses strengths, weaknesses, opportunities and threats. Strengths and weaknesses are the internal conditions of your business. According to experts, most small businesses are great at looking at the internal aspects but fail to look externally, which are the threats and opportunities. Taking a closer look, here are some key questions you must be able to answer when creating your SWOT:

Strength:
1. What do you do well? For example, review your sales, operations, marketing and management.
2. What are your core competencies?
3. What experience do you bring to the table?

Weaknesses:
1. Where do you lack resources? For example, evaluate areas such as customer service, marketing, accounting and business planning processes.
2. In what areas can you make improvements?
3. Where are you losing revenue?

Opportunities:
1. What new requests are your customers asking for? Can you fulfill their needs?
2. What are the technological advancements?
3. What are the economic trends that benefit you?

Threats:
1. What are the negative economic trends?
2. What are the negative political and social trends?
3. Where are your vulnerabilities?

Set SMART Goals
Your business success depends on designing an effective goal-setting strategy. Goal setting is crucial if you want to remain successful and competitive. Once you identify what goals you want to implement, you will need to find a way to review and measure progress. Some goals will take time to achieve, so it is important to measure your progress regularly. Try implementing SMART Goals into your planning. SMART Goals is a simple tool used by businesses to formulate an actionable plan for results. SMART illustrates the 5 characteristics of an efficient objective:

•S – specific
•M – measurable
•A – attainable
•R – realistic
•T – timely

A common reason for failure in completing goals is having too many on your plate. Determine what your priorities are and then focus on them. By prioritizing your goals, you are focusing on those that are important to the overall success of your company. The key to success in setting goals for your business is making sure they are attainable and measurable.

Create Practical Time Management Goals
Once you’ve set your goals, you need a plan to manage them. Your time is your most valuable asset! Being able to manage your time efficiently is paramount! Time management skills are extremely important as you go through your day wearing the many hats it takes to run a small business.

Why do you want to set specific goals to manage your time effectively? Well, setting simple goals will force you to plan your time wisely, thus, allowing you to get a sense of achievement and reduce work and life stress. For example, if spending time with your family is important, try working fewer hours on Friday so that you can honor that goal.

By scheduling your time based on your goals, you can assess if your goals truly align with your core values, both professionally and personally. If you find that your goals are out of align, then you are able to identify key areas that need adjusting before they get out of control.

Design a Stellar Customer Service Strategy
Having a well thought out and planned customer service strategy is a vital and important part of your business model. What is quality customer service? It involves relationship building, establishing communication, building trust and resolving potential problems or conflicts.

Are you at the top of your customer service game? Do you have processes in place to handle customer complaints? How do you measure quality service? According to most consumer surveys, a typical business hears from about 4% of its unhappy customers; while 96% just go away and 91% will never come back.

Don’t sit on your morals! You should never get too comfortable, instead, regularly assess the strengths and weaknesses of the quality of your services, your processes and your customer approach. As a business owner, you should make it a practice to over deliver and under promise.

Measure your Progress
You’ve been stuck in this rut for a while and chances are you weren’t measuring your customer’s satisfaction. Make it apart of your day-to-day routine to ask your customers for their opinions. Welcome suggestions about how you could improve their experience. A few ways that you can gather their feedback:

•Surveys or questionnaires. The most effective way I have found is to create electronically. Though there are several popular services, I have had the best experience with Survey Monkey.
•Phone. Make sure you are professional and ask permission to take up their time. Create a simple script so that you can stay on target and consistent.
•E-mail. This is a quick and easy way. Check your message for grammar and other inaccuracies.

Getting unstuck and out of your rut takes effort and intention. By moving through and letting go of your fears will enable you to stay focused and keep it moving!