If you use your car for business purposes, you may be able to claim a deduction for the expenses you incur during the year. But, there are certain rules and requirements to have them qualify as deductible car or truck expenses.
All or a portion of the cost of owning and using a vehicle may be claimed as a business expense.
You may claim these, as long as you maintain records that can substantiate your business use and expenses.
- You must record the vehicle make and model;
- If the weight is greater or less than 6,000 pounds;
- Date of purchase and evidence of amount paid;
- The date the vehicle was placed in service for business, and
- The odometer reading on the first and last day of the tax year.
Along with these records, you must also maintain an accurate log of actual business travel. This must include the mileage, date and purpose of the travel.
There are two methods you can use to determine your eligible deduction: standard mileage rate or the actual expense method.
If your vehicle is used for both personal and business purposes, the costs related to the vehicle must be divided based on the mileage driven for each purpose. If you lease a car, you must use the standard mileage rate for the entire lease period, including renewals.
To use the standard mileage rate, you must track your miles with a log because the rate varies for use throughout the year 2011. For all of the miles driven for business use from January 1, 2011 to June 30, 2011 the rate is 51 cents per mile. For all of the miles driven for business use from July 1, 2011 to December 31, 2011 the rate is 55.5 cents per mile.
To apply the actual expense method, you must determine what it costs to operate the car for the business portion of the overall use of the vehicle. Include gas, oil, repairs, tires, insurance, registration fees, licenses, and depreciation attributable to the portion of the total miles driven that are business miles. Car expenses for personal property tax, parking fees and tolls attributable to business use are deductible, whether you use the standard mileage rate or actual expenses.
To determine which method is more beneficial for you and if the IRS will allow you to use it, it is best to consult a CPA. This is a broad overview of a very complex topic with more regulations than listed above. But, hopefully you gained an understanding of this tricky tax topic!