Question

Teresa is a civil engineer who uses her automobile for business. Teresa drove her automobile a total of 11,965 miles during 2019, of which 80% was business mileage. The actual cost of gasoline, oil, depreciation, repairs, and insurance for the year was $6,440. Teresa is eligible to use the actual or standard method. If required, round your answers to the nearest dollar. a. How much is Teresa's transportation deduction based on the standard mileage method? $ b. How much is Teresa's transportation deduction based on the actual cost method? $ c. Which method should Teresa use to calculate her transportation deduction? Since the method yields the larger deduction, Teresa should use the method to determine her deduction.

Answer 1

Answer:

a) $5552

b) $5152

c) Since the standard mileage method yields the larger deduction, Teresa should use the standard mileage method to determine her deduction.

Explanation:

a. How much is Teresa's transportation deduction based on the standard mileage method?

Her miles is:

= 11,965 miles * 80%

$= \frac{11965 * 80}{100} \\= \frac{957200}{100} \\= 9572$

According to the IRS site, the standard mileage rate for 2019 is 58 cent

So, her deduction is:

$= 9572 * 58\\= 555176$

= 555, 176 cent

To the nearest dollar, we divide by 100:

555176/100 = $5551.76

which is approximately $5552 to the nearest dollar

b. How much is Teresa's transportation deduction based on the actual cost method?

By actual cost, the deduction is:

= 80% * $6440

$= \frac{6440 * 80}{100} \\= \frac{515200}{100} \\= 5152$

To the nearest dollar, Teresa deduction is $5152

c. Which method should Teresa use to calculate her transportation deduction?

Since the standard mileage method yields the larger deduction, Teresa should use the standard mileage method to determine her deduction.