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Home └NLT Pro Network Community Preparer Training └Chapter 4 & 5: Deducting Vehicle and Mileage Expenses; Travel, Meals, and Entertainment Deductions

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Chapter 4 & 5: Deducting Vehicle and Mileage Expenses; Travel, Meals, and Entertainment Deductions

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This lesson provides guidance on accurately deducting vehicle and mileage expenses, along with travel, meals, and entertainment costs. Help your clients maximize these deductions while staying compliant.

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1. Kevin uses his personal car for both personal and business purposes in his landscaping business. He drove 10,000 miles this year, 6,000 of which were for business purposes. How should Kevin calculate his mileage deduction using the standard mileage rate?
He can deduct the total 10,000 miles driven. He can only deduct 50% of the miles driven. He can deduct the 6,000 business miles using the IRS standard mileage rate. He can only deduct expenses if he uses the actual expense method.
2. Sarah drives her personal vehicle for business-related errands 40% of the time and for personal errands 60% of the time. She spends $4,000 a year on gas, repairs, and insurance. How should Sarah handle her vehicle expenses using the actual expense method?
She can deduct the full $4,000 as a business expense. She can deduct $1,600, which represents 40% of the total vehicle expenses. She can deduct only the cost of gas, not repairs or insurance. She cannot deduct any vehicle expenses because the car is used for personal purposes.
3. John leased a vehicle for business use. He uses the car 70% of the time for his delivery business and 30% of the time for personal errands. How should he report the lease payments for his business?
He can only deduct the portion of the lease payments related to business use (70%). He can deduct the full lease payments as a business expense. He cannot deduct lease payments on a vehicle. He must purchase the vehicle to claim any deductions.
4. Megan uses the standard mileage rate for her vehicle deduction. She also had to pay $500 in parking fees and tolls while traveling for business. How much of the parking fees and tolls can Megan deduct? a) b) 50% of the parking fees and tolls. c) d)
None, because she uses the standard mileage rate. She can deduct the full $500 in addition to the standard mileage rate. She can only deduct tolls, not parking fees. 50% of the parking fees and tolls.
5. Mike purchased a new truck for his delivery business, which he uses 80% for business and 20% for personal use. If he wants to depreciate the truck, what portion of the depreciation can he deduct?
100% of the depreciation since the truck is primarily for business use. 80% of the depreciation based on the business use percentage. Only the first year’s depreciation, then nothing further. He cannot depreciate the truck if it’s used for personal purposes.
6. Linda travels to a client meeting in another state and spends $800 on airfare, $600 on hotel accommodations, and $300 on meals. How much of her travel expenses can she deduct?
She can deduct the full cost of the airfare, hotel, and meals. She can only deduct the airfare and meals. She can only deduct the hotel and meals expenses. She can deduct the airfare and hotel expenses in full but only 50% of the meals.
7. Peter travels to a business conference and extends his trip for a personal vacation. His airfare was $500, hotel for the business portion of the trip was $300, and hotel for the vacation portion was $400. How should Peter report these expenses?
Deduct the full $1,200 as business travel. Only deduct the hotel cost for the business stay. Deduct the vacation hotel cost as a personal deduction. Deduct the airfare and $300 for the business-related hotel stay.
8. John took a client out for dinner after a business meeting and spent $200. How much of the meal can he deduct?
He can deduct 50%, or $100, of the meal expense. He can deduct the full $200 if the meal was for a client meeting. He cannot deduct the meal expense. He can only deduct $50 of the meal.
9. Sarah is a financial consultant and bought tickets to a sporting event to entertain a client. She also purchased food at the event. How should Sarah handle these expenses for deduction purposes?
She can deduct the cost of the tickets and the food as a business entertainment expense. She can deduct both the tickets and the food as a meal and entertainment expense. She can deduct only the cost of the food, not the tickets. She cannot deduct any entertainment expenses under current tax law.
10. Jane spent $100 on a lunch meeting with her business partners and $50 on a personal dinner with friends. How much of the $150 can she deduct?
She can deduct the full $150. She can deduct only $50 for the business-related lunch. She can deduct 50% of the business lunch and the personal dinner. She cannot deduct any meals.