Question

Jackson, a self-employed taxpayer, uses his automobile 90% for business and during 2020 drove a total of 14,000 business miles. Information regarding his car expenses is listed below.
Business parking $140
Auto insurance 1,300
Auto club dues (includes towing service) 180
Toll road charges (business-related) 200
Oil changes and engine tune-ups 210
Repairs 160
Depreciation allowable 2,850
Fines for traffic violations (incurred during business use) 320
Gasoline purchases 2,800

1. What is Jackson's deduction in 2018 for the use of his car if he uses:

a. The actual cost method?
b. The automatic mileage method?

2. What records must Jackson maintain?

Answer 1

Answer:

A. $7,090

B. $8,390

C. The records that Jackson must maintain is to keep a LOG file that contain the copies of all the receipts for (a) as well as a mileage logs file for (b)

Explanation:

a) Calculation for What is Jackson's deduction for the use of his car if he uses The actual cost method

Jackson's deduction

= 140+200+(90%*1300+180+210+160+2,850+2,800)

Jackson's deduction=140+200+6,750

Jackson's deduction=$7,090

Therefore Jackson's deduction for the use of his car if he uses The actual cost method will be $7,090

b)Calculation for What is Jackson's deduction for the use of his car if he uses The automatic mileage method

Jackson's deduction=( 57.5%* 14,000)+140+200

Jackson's deduction= 8,050 + 140 +200

Jackson's deduction=$8,390

Therefore Jackson's deduction for the use of his car if he uses The automatic mileage method will be $8,390

c) Based on the information given the records

that Jackson must maintain is to keep a LOG file that contain the copies of all the receipts for (a) as well as a mileage logs file for (b)