Tax Deduction – Car deductions

You may take miles or actual costs for business use of your car. Which ever you use you will have to continue to use. You may not change methods. You must be aware of your state’s rules as well as the IRS. They are not always the same.

If you only use your car for business then you can take off all your expense to maintain your car. However, if you also use your car for personal travel then you will need to use of two methods to determine your deductions. You can take miles or actual costs.

 

Mileage

Each year the IRS determines the mileage rate we can use to figure our deduction. The IRS mileage rate allows for regular maintenance that might accrue. When using mileage I recommend my clients print off Mapquest.com directions. Mapquest.com will give you the miles for one way. You will need to double this number. You can also take off parking expense and tolls. This is the easiest way to handle this deduction.

 

Actual cost

Taking the actual cost takes more work. You will need to keep all your receipts and figure the amount of time you used your car for business in order to take this deduction.

 

Record keeping

You need to keep your records in good form for up to ten years in case you get audited. You need to know the purpose of the trip, where you went, and the miles. If you set up your bookkeeping in the way we described in past posts you will have proof of this information.

If you are using actual costs you will need to organize your records so that you can prove your expense.

 

Note

As always check with your tax person as to how they wish to receive your information.

 

For more information you may wish to check out these publications.

Publication 463: Travel, Entertainment, Gift, and Car Expenses

Topic 510 – Business Use of Car.

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