To take a business deduction for the use of your car, you must determine what percentage of the vechile you used for business. No deduction is allowed for strictly personal use, such as commuting.
Deductible car expenses can include the cost of: 1) traveling from one workplace to another, 2) making business trips to visit customers or attending business meeting away from your regular workplace, and 3) traveling to temporary workplaces.
It is important to keep complete records to substantiate items reported on your tax return. In the case of car and truck expenses, the records required depend on whether you claim the standard mileage rate of actual expenses.
Standart mileage rate: To claim the standard mileage rate, appropriate records include documentation that identifies the vehicle and provides ownership or lease, and shows miles traveled, destination and business purpose. If you want to use the standard mileage rate for a car you own, you must choose to use it in the first year the car is available for use in your business. Then in later years, you can choose to use iether the standard deduction or actual expenses.
Actual expenses: To claim actual expenses, add your annual car operating expenses, including gas, oil, tires, repairs, license fees, lease payments, registration fees, garage rental, insurance and depreciation. Multiply the car operating expenses by the by the percentage of business use to arrive at your deductible expense. Business-related parking and road tolls are fully deductible expenses that you do not have to reduce by the business-use percentage.
