In 2013 Jessica bought a new heavy truck for $120,000 to use 80% for her sole pr

Question

In 2013 Jessica bought a new heavy truck for $120,000 to use 80% for her sole proprietorship. Total miles driven include 15,600 in 2013, 18,720 in 2014, and 19,500 in 2015. (Use Table 6A-1 and Table 6-2) (Do not round intermediate calculations. Round your final answers to the nearest whole dollar amount.)

a. If Jessica uses the standard mileage method, how much may she deduct on her 2015 tax return (miles were incurred ratably throughout the year)?

b. What is the deduction for 2015 assuming the actual method was used from the beginning? Calculate depreciation only; the truck is not limited by the luxury auto rules. Also, assume §179 was not elected in the year of purchase.

Explanation / Answer

a.

Mile driven in 2015 = 19,500 mile

Mile driven for business purpose = 19,500 * 80% = 15,600 miles

Deduction for 2015 = 15,600 miles * 57.50 cents = $8,970

b.

Deduction for 2015 = $120,000 * 19.20% * 80% = $18,432

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