When preparing a tax return for a dental practice vehicle expense, it’s crucial to accurately account for vehicle expenses. Dentists, like many professionals, use their vehicles for various business purposes. Such as traveling to patient appointments, meetings, or even managing office-related tasks. These expenses can significantly impact tax deductions. However, the key is understanding which vehicle expenses qualify and how to properly track them.
Non-deductible vehicle expenses
It’s also important to note that certain vehicle expenses may not be deductible. For example, commuting from home to the office is typically considered personal, so expenses incurred during that commute cannot be written off. Additionally, if a dentist uses a vehicle exclusively for personal purposes, no deductions for business-related vehicle expenses would be allowed.
Deductible vehicle expenses
There are two primary methods for claiming vehicle expenses: the standard mileage rate and actual expense method. The standard mileage rate is typically easier to use. The IRS sets a per-mile rate each year, and dentists can multiply the miles driven for business purposes by that rate to determine their deduction. For 2025, for instance, the IRS mileage rate was 70 cents per mile. Dentists must maintain a log or other documentation showing the business miles driven to use this method.
On the other hand, the actual expense method allows for a more detailed deduction. With this approach, the dentist can deduct a percentage of various vehicle-related costs, such as gas, oil, maintenance, insurance, and depreciation. To determine the business portion, the dentist needs to keep track of total miles driven, both for business and personal use. Then, they can calculate the percentage of business miles relative to total miles driven and apply that percentage to the total expenses incurred.
Regardless of the method chosen, accurate record-keeping is vital. Dentists should maintain detailed logs, receipts, and documentation of vehicle-related costs. Keeping a running record of all expenses can ensure they don’t miss out on deductions. It’s also wise to separate business and personal use as clearly as possible. A clear, well-documented log or even a mileage tracking app can save time and provide proof in case of an IRS audit.
By understanding these rules and methods, a dental CPA can maximize their vehicle-related tax deductions, helping reduce taxable income and lower their overall tax burden.