How to Deduct Business Travel Expenses for Tax Purposes
Good news for business owners: you can always deduct your business travel expenses for tax purposes. Whether you’re using a private car or a company car, there are ways to minimize your tax burden. However, vehicle taxation can be complicated. The tax office has several taxation methods, so you won’t always have the freedom to choose how to classify your vehicle. The classification depends on whether your car is considered a private car or a company car.
Taxation Rules for Private and Company Cars
Here’s an overview of the rules:
- If you use your car for business purposes more than 50% of the time, it must be classified as a company asset.
- If the car is used less than 10% for work, it will always be considered a private asset.
- If your car is used for business between 10% and 50% of the time, you can choose whether to classify it as a business asset or a private asset.
How to Deduct Business Travel Expenses
Now, let’s break down how business trips are deducted:
- For private cars, you can deduct 30 cents per kilometre for business trips at a flat rate.
- For company cars, the entire operating costs are deductible. However, any private use of the vehicle—calculated using the logbook method or the 1% method—must be offset against the operating income.
Conclusion
Understanding how to classify your vehicle and how to deduct your business travel expenses is essential for maximizing your tax savings. Ensure you follow the rules and choose the most advantageous classification for your vehicle to minimize your tax burden.