PEOPLE ARE ALWAYS Wondering if they can subtract certain things from their taxes &mdash, like red wine as a health related expense nice try. The common question: if they can write off their car as a business expense.

For most, the answer is “no.” You usually can not, as an example, subtract the cost of your daily commute to the office. And if you are in, sales, and frequently travel in your car for your employer’s business, the deduction typically just is not all that great more on that later.

But for those of you who are self employed or small business holders, this is, indeed, an choice. In fact, you have got two ways to write off your auto expense &mdash, a simple one, and a more complicated technique that offers greater rewards. If you are the head of your small organization, read on. I am about to explain to you still another perk of being your boss.

Standard Mileage Rate Method
Let me start off with the easier choice. With the standard mileage rate technique, all you have to do is keep track of your business miles. You then subtract some total &mdash, for 2005 it is 40.5 cents per mile for January through August and 48.5 cents per mile for September through December, for 2006 it is 44.5 cents. This figure is meant to reimburse you for the fixed and variable costs of owning &mdash, or leasing &mdash, and operating the car. You are most likely spending more than that, but many of people pick this technique anyway since unlike the alternative you do not have to produce a pile of receipts to back up your deduction.

If you choose this technique, you may be able to assert separate write offs for parking fees and tolls on your business journeys. You may also individually subtract the business of your vehicle loan interest and any personal property taxes on your wheels.

But there are many qualification rules. You can not use the standard mileage rate technique if:

&middot, You have earlier depreciated the car using the depreciation technique clarified below.

&middot, You use five or more vehicles at the same time in your business activity throughout the year.

Actual Cost Method
If you do not meet the criteria for the standard technique, or if you want to save many extra taxes, you may want to think about the actual cost technique. This is trickier, but it does maximize your deductions usually. That is because, depending on your business mileage , you may be able to subtract pretty much anything related to the business use of your car, as well as depreciation, insurance, personal property taxes, registration and license fees, tires, maintenance, repairs, gas, oil and trips to the car wash.

But think about yourself warned: you are going to have to keep in depth and I do mean detailed records. The best way to do so is by religiously entering all your business miles &mdash, with the date, starting point and destination &mdash, into a diary kept in your glove compartment. As well, make sure to keep all receipts and note your beginning and ending odometer readings for the year.

If you do decide to use this technique, let’s give you a tip on your car selection: You most likely do not want to go with one that is going to wildly impress your neighbors and clients. Why? Unfortunately, your friends in Congress have forced ridiculously low limitations on depreciation for most passenger vehicles. If you put your car into business use in 2005, your maximum depreciation allowance will usually be as follows:

&middot, Year 1: $2,960
&middot, Year 2: $4,800
&middot, Year 3: $2,850
&middot, Year 4: $1,675
&middot, Thereafter: $1,675

The 2006 figures will be about the same, when they’re declared.

As you may be able to see, your car’s cost is not a factor. So you may not live long enough to finish depreciating that new $60,000 BMW. And it gets worse. The above allowances assume 100 business use. If you use that BMW only 60 for business, your first year depreciation write off will be only $1,776 .60 x $2,960. Time to write your congressman?

SUVs, Pickups and Vans
Mercifully, though, there’s an exemption. If you purchase a “heavy” SUV, pickup or van as opposed to what the IRS calls a “passenger automobile” and use it over 50 for business, you are entitled to more generous depreciation allowances.

What exactly is “heavy”? It is a set of wheels with a gross vehicle weight ranking GVWR above 6,000 pounds. SUVs, pickups and vans weighing in above the magic number are considered trucks for tax reasons, and you may be able to usually subtract the following percentages of the business use part of your “truck’s” cost:

&middot, Year 1: 20.00
&middot, Year 2: 32.00
&middot, Year 3: 19.20
&middot, Year 4: 11.52
&middot, Year 5: 11.52
&middot, Year 6: 5.76

Even better: Certain pickups and vans used over 50 for business also meet the criteria for the “Section 179 deduction.” This big break lets you to now subtract up to $105,000 of equipment additions throughout 2005 $108,000 for 2006, subject to certain limitations. Heavy vehicles that are classified as SUVs are qualified for a reduced Section 179 deduction at $25,000. Bottom line? You may be able to usually write off a big part of the complete business use of the cost in year one. Sweet!

Vehicle costs for Employees
As I said, many employees can subtract business related car costs, but usually speaking it is no great shakes. That said, if you use your car on company business because, you are an outside salesperson, you may be able to still use the standard mileage technique or the actual cost technique to compute your deductible costs.

The problem is, your costs must surpass the total repaid by your employer. And your itemized deduction will be restricted to the total of unreimbursed costs in extra of 2 of your adjusted gross earning. Under these rules, comparatively not many employees are really able to assert any important write offs.

Finally, if you get an employer mileage reimbursement equal to or less than the IRS approved cents per mile figure, you are allowed to pocket the reimbursement tax free and blow off any possible deductions. Many employees decide this trade off in the interest of simplicity.