Problem:
Michelle is an employee who must use her personal automobile for employment-related business trips. During 2014, Michelle drives her car 60% for business use and incurs the following total expense (100% use of car):
| Gas and oil |
$ 9,000 |
| Repairs |
1,400 |
| Depreciation |
4,700 |
| Insurance and license fees |
1,300 |
| Parking and tolls (business related) |
100 |
|
$ 16,500
|
Michelle drives her car a total of 40,000 miles (24,000 business miles) during 2014 and receives a reimbursement of $0.40 per business mile from her employer. Assume that an adequate accounting was made to Michelle's employer.
Required:
Question 1: What amount is deductible (before the 2% nondeductible floor) if Michelle uses the standard mileage rate method?
Question 2: What amount is deductible (before the 2% nondeductible floor) is Michelle uses the actual cost method?
Note: Be sure to show how you arrived at your answer.