Dear Client:

The IRS has issued the depreciation deduction limitations and lease inclusion amounts for vehicles purchased or leased in 2009. As you may know, there are two basic methods for computing vehicle expenses, the standard mileage rate (55 cents per mile for 2009) or the actual expense method. If you use the standard mileage rate method you may not depreciate your car or deduct lease payments. Under either method, if your vehicle is used for personal as well as business purposes, only expenses or mileage attributable to the business use are deductible.

If you use the actual cost method, you may take deductions for depreciation or lease payments, registration fees, licenses, gas, insurance, oil, repairs, garage rent, tolls, tires and parking fees.

Determining whether you should use the standard mileage rate or actual expense method, or whether to lease or purchase a vehicle may depend in part on the depreciation deduction limitations and lease inclusion amounts provided by the IRS. In addition, there are tax credits available for energy-efficient vehicles that should be considered when making these decisions.

Regardless of the option that offers the larger tax benefits, you should remember that the goal is to produce the lowest overall transportation costs.

For information regarding substantiating your vehicle deduction, please see blog entry "Recordkeeping"

Doug