Question

in 2019, Jessica bought a new heavy truck for $31,000 to use 80% for her sole proprietorship. Total miles driven include 7,200 in 2019 . 8.200 in 2020 , and 7.700 in 2021 (Use Table 6 A-1) Required: 0. If Jessica uses the standard mileage method, how much may she deduct on her 2021 tax return (miles were incurred ratably throughout the year)? b. What is the deduction for 2021 assuming the actual method was used from the beginning? Calculate depreciation only, the truck is not limited by the luxury auto rules. Also, assume 5179 was not elected in the year of purchase. Note: For all requirements, do not round intermediate calculations. Round your final answers to the nearest whole dollar amount.

Answer 1

a. Jessica may deduct $4,312 on her 2021 tax return using the standard mileage method. b. The depreciation deduction for 2021, assuming the actual method was used from the beginning, is $51,607.

Step-by-step explanation:

a. To calculate Jessica's deduction using the standard mileage method, we need to multiply the total miles driven in 2021 by the standard mileage rate for that year. According to Table 6 A-1, the standard mileage rate for 2021 is $0.56 per mile. Therefore, Jessica's deduction for 2021 would be:

Total miles driven in 2021: 7,700
Standard mileage rate: $0.56 per mile

Deduction for 2021: 7,700 miles x $0.56/mile = $4,312

b. If Jessica had used the actual method from the beginning, she would need to calculate the depreciation of the truck for 2021. Since the truck is not subject to luxury auto rules, there are no limitations on the depreciation deduction. The depreciation deduction for 2021 can be calculated using the following formula:

Depreciation deduction = (Cost of the truck / Total expected miles) x Miles driven in 2021

First, we need to determine the total expected miles for the truck. To do this, we subtract the percentage of business use (80%) from the total miles driven:

Total miles driven: 7,200 + 8,200 + 7,700 = 23,100
Total expected miles: Total miles driven - (Total miles driven x Business use)

Total expected miles: 23,100 - (23,100 x 0.8) = 23,100 - 18,480 = 4,620 miles

Now we can calculate the depreciation deduction:

Depreciation deduction = ($31,000 / 4,620 miles) x 7,700 miles

Depreciation deduction = $6.71/mile x 7,700 miles = $51,607

Answer 2

To calculate the deductible amount on her 2021 tax return using the standard mileage method, Jessica needs to calculate the total deductible miles driven for her sole proprietorship. Using the actual method, she can calculate the depreciation expense for the truck by dividing the purchase price by the total miles driven and multiplying it by the miles driven for business purposes.

Step-by-step explanation:

To calculate the deductible amount on her 2021 tax return using the standard mileage method, Jessica needs to calculate the total deductible miles. First, she needs to find the total miles driven in 2021, which is the sum of miles driven in 2019, 2020, and 2021.

So, the total miles driven in 2021 would be 7,200 + 8,200 + 7,700 = 23,100 miles.

Next, she needs to calculate the percentage of miles used for her sole proprietorship, which is 80%. To find the deductible mileage for her business, she multiplies the total miles driven by the percentage used for the business: 23,100 * 0.8 = 18,480 miles.

To calculate the deduction for 2021 assuming the actual method was used from the beginning, she needs to calculate the depreciation expense for the truck. Given that the truck was bought for $31,000, the depreciation expense can be calculated using the following equation: depreciation expense = (purchase price / total miles) * business miles.

Assuming the truck has a salvage value of $0, Jessica's depreciation expense for 2021 would be ($31,000 / (7,200 + 8,200 + 7,700)) * 7,700 = $8,651.88.