Managing High Gas Prices: Launch your own Green Business and Deduct Business Miles
Like the rest of nature that evolves remarkably to stresses in the environment, people will be able to adapt to high gas prices. Really. In many parts of Europe, people are paying upwards of $7 – $8/gallon of gas.
Things will change here in the USA. These changes will sometimes more difficult for some than others. More of us are already using public transportation, riding bikes — even moving closer to where we work or pressuring employers to offer flextime (to avoid rush hours) or telecommuting from home. In part thanks to the mushrooming energy costs, how much of business was done in the period of relatively inexpensive oil and other fossil fuels will morph into a new model of business model where energy costs are front and center.
Another trend: the explosion of people starting their own green business as an ecopreneur, operating their business without destroying the planet or exploiting people. Energy conservation and efficiency are often the very DNA of these enterprises. Eventually, the politicians in Washington DC might realize that opening up ANWR merely delays the reality that we need to cut our addiction to oil, for climate’s sake. We need to get back to 350 parts per million of carbon dioxide to maintain some degree of climate stability. Burning more oil, coal or natural gas is not the way.
There are many financial benefits of becoming a business, depending on how you structure it. Not only are businesses taxed after their expenses have been deducted, but many legitimate deductions are available to a small business that reduce its reported earnings — like the use of your personal car for business-related and documented use.
Owners of vehicles that are used for business purposes can deduct those miles associated with business use and be reimbursed for mileage by the business. For example, when we drive to speak at a Green Festival, MREA Renewable Energy and Sustainable Living Fair, or to visit a client, we reimburse ourselves at the IRS specified rate. Make sure to maintain a vehicle travel mileage log for each vehicle used for business purposes.
Making Money from your FUEL EFFICIENT Vehicle
One of our discoveries we write about in ECOpreneuring is the tax benefit of using our fuel-efficient vehicle for business purposes. Every year, the IRS sets the reimbursable rate for the business use of your vehicle, based on national fleet repair and maintenance averages and fuel costs, both of which are rising. We get the same rate whether we drive a super-fuel-efficient Toyota Prius or Volkswagen Jetta TDI (diesel) versus a low-mileage Hummer. It turns out we’ve managed to make money off each business mile we put on our Volkswagen Jetta TDI because the cost of operating and fueling it is less than for other new and less fuel-efficient vehicles.
How? First, we only buy used vehicles because as soon as most new vehicles are driven off the dealer’s lot, they lose about 25 percent of their value. Second, by the time we might sell our used vehicle with years of reimbursed business miles paid to us as owners, the cost of the vehicle would have broken even. For example, one year we might have 7,193 business related miles put on our VW Jetta, multiplied by the IRS designated rate (2007) of $.445/mile, resulting in the business reimbursing us for the business use of the car to the tune of $3,200. Keep in mind that this expense item reduces the reported earnings of the business by $3,200 as well.
So if you have to drive, why not create a green business where you can at least deduct your miles related to business use of your vehicle? By the way, when we can, we put B100 (100 percent biodiesel) or B10 (locally secured from a Smart Station) in our Jetta. Our other vehicle exclusively used for business is an all-electric CitiCar. We also work from our home office, completely powered by the wind and sun.
Photo Credit: scotech at Flickr (under a Creative Commons license)