What Can You Claim When Filing Your Taxes for Vehicle Use?
What Can You Claim When Filing Your Taxes for Vehicle Use?. Filing an income tax return is a process that many taxpayers dread, but tax returns present an opportunity to claim deductions that reduce income tax liability, which can result in a refund. The IRS offers a wide range of tax deductions, including write-offs for various expenses related to business and empowerment, such as using a car for business purposes.
Vehicle Use Deduction Basics
The cost of using a vehicle in a business to produce income or to complete tasks related to a job is a tax-deductible expense. The IRS states that all of the costs associated with operating a car for business purposes, such as the cost of gasoline, oil, repairs, insurance, tires, depreciation, licenses and registration fees are deductible. Car owners may only deduct expenses incurred when using a car for business purposes. The cost of commuting to a normal workplace is not considered a deductible business use, but the cost of driving to a second workplace and to visit clients is deductible.
Actual Car Expenses
Taxpayers have two options for claiming deductions for the business use of a vehicle. The first option is to deduct the actual car expenses incurred on a tax return. Taxpayers that choose to deduct actual car expenses must keep track of all expenses incurred during business use to deduct an accurate amount.
Standard Mileage Rate
Keeping track of every single car expense during a year to claim actual car expenses can be time-consuming, but the IRS offers another method of claiming a vehicle use deduction -- the standard mileage rate. The standard mileage rate is an expense rate set by the IRS based on the average cost of operating a vehicle in a certain year. Taxpayers may choose to deduct an amount equal to the total mileage a car is driven for business purposes -- multiplied by the standard mileage rate -- instead of actual car expenses. As of 2011, the standard mileage rate is 51 cents per mile.
The standard mileage rate can change over time due to changes in car expenses. For example, if the cost of gasoline rises in a certain year, the IRS might increase the standard mileage rate. For certain vehicles, such as those with very low fuel efficiency, claiming actual car expenses may result in a larger deduction than using the standard mileage rate.
- IRS.gov: Topic 510 - Business Use of Car
- IRS.gov: Transportation
- IRS.gov: IRS Announces 2011 Standard Mileage Rates