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Independent contractors can claim SUV break
Dear Tax Talk:
I am a contract consultant engineer working away from my home and
I drive from one state to another state every month. I qualify for
per diem because I am working away from my home. If I buy an SUV over
6,000 pounds, can I use the SUV for tax credit? I am working for a
different consulting company each time and I do not have a permanent
job. My job is a six-to-nine month term and I travel a lot. Thanks.
Mo
Dear Mo:
As a contract consultant, I assume you're treated as an
independent contractor. As an independent contractor, you don't
have taxes taken out of your pay but rather you file your taxes
as a sole proprietor on Schedule C. If this is the case then you're
self-employed. As a self-employed individual, you're treated as
if you're in your own business and you qualify for the tax break
afforded to sport utility vehicles meeting certain specifications.
Included in the specifications is the size of the
vehicle and the amount of use. Speaking plainly, size and frequency
matter. You can read more about the SUV size requirement in this
Bankrate
article. The key thing to keep in mind is that the law requires
you to use the vehicle more than 50 percent for business in order
to get the tax break.
Since your contracts are of short duration, your tax
home for purposes of deducting expenses is probably where you live.
Therefore, the moment you leave your house for a business trip your
automobile is considered used for business purposes.
Unlike an employee, you do not commute to and
from work, which would be considered personal use of the vehicle
and therefore not tax deductible. Having your tax home helps you
get the business use of the vehicle up over the 50 percent requirement.
Accordingly, if you bought a big fat expensive SUV you can write-off
a substantial amount of the cost in the year you buy it.
-- Posted: Aug. 20, 2003
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