Can a Sole Proprietor Write Off a Car?

Can a Sole Proprietor Write Off a Car?
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Operating a small business can involve a wide variety of expenses, from renting office space and paying employees to visiting clients at their homes. The Internal Revenue Service offers tax write-offs or deductions on certain business expenses as a way to encourage economic activity. The business use of a vehicle is a tax-deductible expense for sole proprietors.

Vehicle Deduction Basics

A sole proprietor who uses a car only for business purposes may deduct the entire cost of the car's operation on his income tax return. The cost of fuel, oil, maintenance and repairs are all tax-deductible. If a business owner uses a car for both business and personal purposes, the expenses related to personal use are not tax-deductible.

Deductible Uses

The IRS limits deductions to uses that are "ordinary and necessary" for the operation of a business. Deductible uses include traveling from one workplace to another, visiting clients, parking fees paid while visiting clients and customers and traveling to business meetings away from a regular workplace. Nondeductible uses include commuting to a normal place of business, parking fees paid at a primary workplace and using a car to run personal errands. Business owners with home offices can deduct the cost of traveling to other work locations.

Deduction Methods

Business owners can take a deduction for vehicle expenses using one of two methods: the actual expense method or the standard mileage rate method. Under the actual expenses method, the owner simply keeps track of the cost of all business uses of a vehicle and claims a deduction for that amount. The standard mileage rate deduction is based on the number of miles a car is used for business purposes. According to the IRS, business owners can deduct 55.5 cents per mile for business mileage for the 2012 tax year.

Standard Mileage Rate Rules

The standard mileage rate deduction method can save business owners the hassle of keeping track of all car-related expenses, but it is subject to several special rules and restrictions. Businesses that operate five or more cars at the same time cannot use the standard mileage rate method. Filers must choose to use the standard mileage rate method in the first year a car is available for use in order to opt for the standard mileage rate method in the future. If a vehicle is leased, the owner must use the standard mileage rate method.