Intuit Academy Tax Practice Exam

Regarding a Sprinter van used for business, which of the following deductions is correct?

1. The cost of tires and oil changes can be deducted

2. The van's purchase price is fully deducted

3. Only fuel expenses can be deducted

4. Depreciation on the van is not allowed

The correct answer is: The cost of tires and oil changes can be deducted

The statement about the deducibility of the cost of tires and oil changes is accurate because these expenses are considered ordinary and necessary business expenditures. The IRS allows businesses to deduct expenses that are directly related to the operation and maintenance of their vehicles. Regular maintenance costs such as oil changes are essential for ensuring that the vehicle remains operational and efficient, while expenses like tires are necessary for safe vehicle operation. In contrast, the other choices contain elements that reflect common misconceptions about vehicle expense deductions. For instance, fully deducting the purchase price of the van is not permissible under tax rules. Vehicles are typically subject to depreciation, which spreads the deduction over a number of years. Additionally, while fuel expenses can certainly be deducted, limiting deductions solely to fuel overlooks other necessary and allowable expenses that contribute to the overall operation of the vehicle. Lastly, stating that depreciation on the van is not allowed is incorrect; in fact, businesses are generally permitted to depreciate the cost of vehicles used for business, reflected over their useful life while following IRS guidelines.