Car Business Expense Deduction

Deductions for Business Use of Your Car

Click Links Above To Order HR Block TaxCut Software, Get Started Now!

Topic 510 - Business Use of Your Car

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.

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

TaxReturnRelief.com US tax help: AL, AK, AZ, AR, CA, CO, CT, DE, DC, FL, GA, H, ID, IL, IN, IA, KS, KY, LA, ME, MD, MA, MI, MN, MS, MO, MT, NE, NV, New NH, New NJ, NM, NY, NC, ND, OH, OK, OR, PA, RI, SC, SD, TN, TX, UT, VT, VA, WA, WV, WI, WY