Use your car for business? Here's how to deduct car-related expenses on your taxes.
When you use your car for business, the IRS allows you to deduct that expense from your taxable income.
You鈥檒l itemize your deductions, using Form 2106 (Employee Business Expenses) if your employer partially reimbursed you for expenses. If your employer provided no reimbursement at all, you鈥檒l use Form 2106-EZ (Unreimbursed Employee Business Expenses) to claim your costs. If you鈥檙e self-employed or work as a contractor, you鈥檒l claim expenses on Schedule C.听If you听,听the tax provider will ask about your mileage during the interview process and calculate the deduction for you.
The standard mileage deduction is the most straightforward way of calculating your driving expense. You鈥檒l need to track your business-related mileage with a log or smartphone app, but figuring out your deduction is easy: You simply multiply by the IRS鈥� allowable rate.
You also have the option of tracking and deducting the actual expenses you incur while听using your vehicle.
As a rule of thumb, don鈥檛 even consider using actual costs if you use your vehicle less than 50% of the time for business. The standard mileage deductions keep things simple as long as you keep track of all your miles.
Standard mileage deduction rates
With the听standard mileage method, the deduction depends on how you used your vehicle.听:
| 听 | 2016 tax year | 2017 tax year |
|---|---|---|
| Business miles | 54 cents / mile | 53.5 cents / mile |
| Medical and moving miles | 19 cents / mile | 17 cents / mile |
| Charitable miles | 14 cents / mile | 14 cents / mile |
Commuting to work is not considered a deductible expense.
Some people can鈥檛 use the standard mileage rates 鈥� for example, those who used an employer-provided vehicle or who racked up the mileage as a limo or taxi driver. You can鈥檛 use the standard mileage rates if you used five or more vehicles simultaneously, which makes you a fleet owner and ineligible.
And you can鈥檛 use the standard mileage rates if you used the actual expenses method in the previous year.
Actual mileage method
If more than half your driving last year听was for business, you might want to consider using the actual expense method. You can do so听when you keep track of all the allowable costs associated with the use of your car or truck. 听
If you choose to deduct actual expenses, you can include the business portions of your vehicle costs associated with:
- Depreciation
- Licenses
- Lease payments
- Registration fees
- Gas and oil
- Insurance
- Repairs
- Garage rent
- Tires
- Tolls
- Parking fees
Section 179
Because vehicle depreciation is largest in the first year, you鈥檒l want to give the Section 179 deduction serious consideration if you purchased a new vehicle for use in your business. The Section 179 deduction, a special rule intended to help small businesses, applies only to an asset鈥檚 first year of use. There are other detailed limits on the deduction, which you can read about on听the听.
No bonus depreciation, a special depreciation allowance, is in effect this year.
This story originally appeared on .
