Business Use of a Car
If you use your vehicle for your job or business, you can deduct expenses related to the cost of operating it. If the car is used for both personal and business reasons, you can only deduct the portion of expenses that relate to the business use of your vehicle.
You cannot deduct any expenses related to commuting from your home to your place of work. However, you can deduct the expenses of commuting from one job to another.
The amount of deductible car expenses can be determined two different ways: standard mileage rate or actual expense. You must keep adequate records supporting your deduction regardless of the method you choose.
Standard Mileage Rate Method
Updated for 2011 returns: The standard mileage rate is 51 cents per mile for the first six months of 2011 and 55.5 cents per mile for the last six months. To use the standard mileage method, you must meet these requirements:
- You must own or lease the vehicle.
- You must not have claimed any method of depreciation except straight-line in previous years (on this vehicle).
- You cannot operate more than five cars, as in a fleet operation.
- You must not have claimed a Section 179 deduction on the vehicle.
- You must not have claimed actual expenses on a leased car after 1997.
- You are not a rural mail carrier who receives qualified reimbursements.
- You must use the standard mileage rate the first year your vehicle is used for business purposes.
- You must use the standard mileage rate for any vehicle you lease.
Actual Expense Method
- You must determine what it actually costs you to operate the car for business purposes.
- Qualifying expenses include gas, oil, repairs, tires, insurance, registration fees, licenses, and depreciation.
- Expenses such as parking fees and tolls are deductible as a separate expense.
If your employer reimburses your vehicle expenses, the expenses may or may not be deductible, depending on the type of plan your employer uses to reimburse you.
- You are not required to prove your expenses to receive reimbursement.
- Reimbursements should be included in your wages.
- Reimbursements included in wages are deductible.
- Expenses are incurred while performing services as an employee.
- Expenses must be accounted for in a reasonable period of time.
- Excess reimbursements must be returned in a reasonable period of time.
- Reimbursements should not be included in your wages.
- Reimbursed expenses are not deductible.
- Expenses not reimbursed are deductible.
For more information see IRS Publication 463.