Vehicle Expenses
Do You Use Your Car
for Business Purposes?
If you use an automobile for business, you may be able to receive a tax
deduction to lower your income tax. Unless your car is used 100 percent
for business, some of your expenses aren’t deductible. The IRS is quick to
question a vehicle used 100 percent for business. Do you, for example,
keep the car at the company headquarters over night?
Deducting auto expenses requires diligent record-keeping. There are two
ways to calculate your auto deductions - the standard mileage rate or
actual expenses. These methods are available whether you own or lease your
vehicle. Taxpayers who wish to use the standard mileage rate in lieu of
actual expenses for computing deductible vehicle expenses must elect to do
so in the first year. Switching to the standard mileage rate in a later
year is not an option.
The actual expense method is as exactly as it sounds. Actual expenses,
such as the cost of gas, oil, insurance, repairs, maintenance, tires,
washing, licenses and depreciation or lease payments, are eligible. For
the standard mileage rate method, instead of tracking the above expenses,
you track the business mileage you accrue and use a standard rate. For
January 1 through June 30, 2011, the standard rate is 51 cents per mile;
for July 1 through December 31, 2011, the rate is 55.5 cents per mile.
You’ll need to keep accurate records of the miles incurred for business
purposes, dates of business use, destinations and the business purpose.
Also, you’ll need to note the odometer readings at the beginning and end
of the year to determine the total miles for the year for all uses. The
important aspect is to make sure you maintain accurate records. The IRS
may disallow a deduction for mileage if you are unable to substantiate
your deduction.
It’s important to note that you cannot deduct commuting mileage (mileage
from your home to your regular job). It is necessary to determine your tax
home. If you are self-employed and maintain an eligible office in your
home, you can deduct the mileage to and from your client’s or customer’s
place of business, as well as between jobs.
As an employee, you can deduct mileage between jobs or to a temporary
assignment. If you do not have a regular place of business, you can only
deduct your transportation expenses to a temporary location outside your
general area of employment.
