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Car Business
Expense Deduction
Topic 510 - Business Use
of Your Car
Deductions for Business Use of Your Car or Auto. There are
two methods that can be use to determine
car expense deductions:
- the standard mileage
rate method
- the actual expense method.
If
you qualify to use both methods, you may want to
figure your deduction both ways to see
which gives you a larger deduction.
Automobile deductible expenses
include:
Payments, gas, insurance,
repairs, tolls, parking fees, list goes
on and on.
In order for you to deduct vehicle costs
off your taxes there has to be a direct
and provable connection between the use
of your automobile and your business.
Commuting, does not count.
If you are a salesperson,
and you use your car to drive around
town visiting clients, you will be able
to take the deduction.
If you work from a home
office, you can take off vehicle
expenses directly related to your
business.
The two methods for calculating your
vehicle deduction are:
- the standard mileage
rate. This is the easiest way to
determine your deduction – simply
take the total number of miles
driven for business use and multiply
it by the rate the IRS has
established.
- You cannot take
the standard mileage rate if you
use your car for hire, such as a
limousine or taxicab, or you
have five or more vehicles in
service at the same time for the
same business.
- or you can deduct
your actual car expenses. This
includes everything related to the
operation of the car – depreciation,
fuel, parking, tolls, lease/loan
payments, repairs, cleaning, even a
car stereo.
- Certain expenses
do not count as operating
expenses: parking tickets, sales
tax on the car, employee
interest payments on the car
loan.
If you qualify to use
either method, the best solution is to
calculate your expense both ways and see
which one provides you with a largest
deduction.
Refer to Government Publication 463
www.irs.gov/pub/irs-pdf/p463.pdf Travel,
Entertainment, Gift and Car Expenses,
for the current standard mileage rate.
If you use the standard mileage rate,
you can add to your deduction any
parking fees and tolls incurred for
business purposes.
The law requires that you substantiate
your expenses by adequate records or by
sufficient evidence to support your own
statement. For further information on
record keeping, refer to Topic 305.
For more information, refer to
Publication 463. irs.gov/pub/irs-pdf/p463.pdf
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