If you use a vehicle in a business or your employer requires you to drive your car to complete work-related tasks, the Internal Revenue Service, or IRS, will allow you to claim a deduction for your car expenses. Although writing off the miles you drive is only one way to calculate the deduction, there is no limitation on the number of miles you can deduct, provided you actually drive those miles.
Writing off Miles
Each year the IRS publishes the amount you can deduct for each mile you drive for work or business purposes. This standard mileage rate reflects the average cost per mile for gas, oil, repairs, insurance, lease payments and all other ordinary car expenses. As a result, if you choose to calculate your deduction using the standard mileage rate, you cannot claim any additional deductions for other car expenses you incur. And if you incur the expense as an employee, you can only claim the deduction if your employer doesn’t reimburse you.
Actual Car Expenses
As an alternative to using the IRS standard mileage rate for your deduction, you can always choose to use the actual expenses you incur throughout the year. When you choose to use actual costs, your deduction can include the cost of gasoline, oil, replacing tires, making repairs, lease payments or depreciation on the car’s purchase price, garage rental fees and insurance. However, when you choose to deduct actual costs, it requires you to keep adequate records so you can calculate your deduction at the end of the year. Moreover, unless you use the vehicle solely for work or business purposes, you need to allocate your total car expenses between deductible and nondeductible use.
Allocating Car Expenses
One way to allocate your car expenses is by using the ratio of work and business miles you drive during the year to the total miles you put on the car. The reason for the allocation is that the IRS never allows you to claim a deduction for car expenses you incur for personal use, such as commuting back and forth to work, to take family trips and to run your personal errands. Alternatively, you can allocate your expenses using the number of days you drive for work or business. However, if you do personal driving on those days, then your allocation won’t accurately reflect your deduction.
Reporting Car Expenses
How you report your car expenses depends on the type of return you file. For example, if you claim a deduction using the standard mileage rate for the work-related driving you do for an employer, you must report the deduction on a Schedule A with all other itemized expenses. But if you use the car in your business, you report the deduction on the appropriate business tax form such as a Schedule C for a sole proprietorship or Form 1120 for a corporation.
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Jeff Franco's professional writing career began in 2010. With expertise in federal taxation, law and accounting, he has published articles in various online publications. Franco holds a Master of Business Administration in accounting and a Master of Science in taxation from Fordham University. He also holds a Juris Doctor from Brooklyn Law School.