If you drive your car often for work-related purposes, you might be able to steer yourself directly towards a lower tax bill. Non-reimbursed car-related expenses are tax-deductible, given certain criteria are met. While you must keep meticulous records on how and when you use your car in the course of doing business, it all adds up in the long run, and you could find yourself driving off with more money in your pocket at tax time.
The IRS provides individual with numerous opportunities to deduct auto-related expenses on their tax return. If you are using your car for professional purposes, you can deduct the price of the gasoline you purchased to fuel your commute.
Mileage or Gas Receipts for Tax Deductions
Although you are able to deduct certain driving-related expenses on your taxes, commuting is not one of them. Travel from your place of residence to your place of employment is considered commuting. The distance of your commute is not a factor in whether or not travel to and from work is considered commuting. If you leave your home to go to work, or a work-related activity, then you cannot claim the mileage tax deduction for these trips.
However, if you go from the location where you conduct business, to a client’s office or anywhere you have to go for work (other than home), then you can write off the gas you used, as it is not considered part of your commute but rather driving performed during the course of doing business. These sorts of expenses are generally deductible for all workers in 2017 if not reimbursed by your employer but as of 2018, they will generally only be deductible by self-employed people.
Specific Deductions to Know
For tax year 2017, you can deduct 53.5 cents per mile you drive for work. This is known as standard mileage rate, and the IRS can change this rate annually. You may apply this rate for up to four cars at the same time, but not for any equipment you need to drive for work, such as a tractor or snowplow. You’re able to use your car for both personal and business-related driving, but you have to keep a strict vehicle log that details when your car was used for business. For instance, if you use your car 50 percent of the time for work, then you may deduct up to 50 percent of eligible vehicle expenses on your taxes.
Actual expenses require more record-keeping, but can net you a larger deduction if you drive a lot, or if you have to travel greater distances for work. When claiming actual expenses, things like gas, repairs, vehicle registration fees, lease payments, depreciation, parking fees as well as tolls can all be written off at tax time. It’s worth noting that if you take a depreciation deduction on your car, then you’re not able to deduct parking fees and tolls, or use the standard mileage rate. If you’re unsure whether or not to take the standard mileage rate or the actual expense deductions, consult with a qualified tax preparer and visit the IRS’ website to read IRS Publication 463 , Travel, Entertainment, Gift, and Car Expenses, for more guidance.
Whatever you claim, remember to save your tax return and gas receipts or mileage logs in case you are audited by the IRS.
Other Tax-Deductible Automotive Expenses
There are a few tax-deductible vehicle expenses that you’ll be glad to know you can write off. Aside from gas and oil changes, you can also deduct car washes, certain vehicular expenses related to job searching and some driving related to moving more than 50 miles away from your old job for new work. If you move more than 50 miles away, you can deduct the driving you did for that, but you cannot deduct your new commute. Tax deductions for parking tickets are not deductible, but if you are involved in an accident during the course of work – and are found not at fault – then you can write off any amount that the other driver’s insurance doesn't fully reimburse you for. If you aren’t fully reimbursed for damage or loss of your car, you may be able to deduct this amount as casualty loss.
2018 Tax Law Changes
A big change in tax law for 2018 is the elimination of certain miscellaneous itemized deductions. These include unreimbursed employee work expenses, including auto mileage or actual vehicle expenses like gas costs. You generally will not be able to deduct these expenses in 2018 or beyond.
If you are self-employed, you generally can still deduct mileage or actual vehicle expenses. The mileage rate for 2018 is 54.5 cents per mile.
More Deductions in 2017
For tax year 2017, you can deduct unreimbursed employee expenses beyond 2 percent of your adjusted gross income. These can include auto mileage or actual vehicle expenses. The IRS mileage rate for 2017 is 53.5 cents per mile.
- Efile: Tax Deductible Car Miles - IRS Standard Mileage Rates
- IRS: Publication 463 (2017), Travel, Entertainment, Gift, and Car Expenses
- Forbes: New: IRS Announces 2018 Tax Rates, Standard Deductions, Exemption Amounts And More
- IRS: Update of 2018 Standard Mileage Rates Notice
- IRS: 2017 Standard Mileage Rates for Business, Medical and Moving Announced
Tara Thomas is a Los Angeles-based writer and avid world traveler. Her articles appear in various online publications, including Sapling, PocketSense, Zacks, Livestrong, Modern Mom and SF Gate. Thomas has a Bachelor of Science in marine biology from California State University, Long Beach and spent 10 years as a mortgage consultant.