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Business Use of Car/Vehicle Tax Guide
When you have a personal vehicle that you use for business (or medical, moving, or charitable) you can deduct the cost of that use on your tax return. Generally the cost will be calculated using IRS approved mileage rates (see below). Rates change at least each year except charitable which can only be changed by Congress.
You are responsible for maintaining a log of your mileage. Office supply stores sell log books, you can use a calendar, a day timer, or your computer. You should record all business trips, showing the dates, where you went, the business purpose, and the number of miles for the trip. It is not necessary to record (but may be helpful) odometer readings.
When you complete your tax return the key question you must answer is: “Do you have written evidence?”
If you drive a large number of miles for business, we recommend you get an oil change in late December or early January of each year. and keep the receipt from the oil change company. This will not prove the business miles, but will help prove the total miles driven.
Business mileage is reported on the Business tax return (generally Schedule C). If you are an employee, but your employer does not reimburse you for business mileage, You can deduct your mileage as a miscellaneous itemized deduction. Miscellaneous Itemized itemized deductions must be over 2% of Adjusted Gross Income.
Medical mileage is reported on the schedule A (Schedule of Itemized Deductions) as a Medical Expense. Total medical expenses including the mileage deduction must exceed 10% (7.5% if the taxpayer or spouse is 65) of Adjusted Gross Income to be deductible.
Moving mileage is for when you move related to a job transfer, or a new job – more than 50 miles. All expenses relating to the Moving expense deduction are reported on form 3903.
Charitable Mileage is not for going to church on Sunday, but is for mileage relating to other volunteer efforts of the charity. The mileage rate for charitable efforts is set by Congress so it doesn’t change each year.
In addition to claiming business mileage you can also deduct any costs related to Tolls and Parking.
The alternative to using the mileage rates for business is to claim actual expenses. You generally do not want to do this unless you use the vehicle 70 – 80% for business. If you use actual expenses you can deduct fuel, maintenance, tires, insurance, depreciation,etc.
If you use the actual expenses method, and you use the vehicle for personal use (going to the grocery store or for a vacation), you must reduce you costs by the personal costs – using the mileage rates.
You cannot switch back and forth between methods. i.e. You cannot use the mileage rate year 1, the actual expenses year 2, the mileage rate year 3.
IRS Circular 230 Notice: Unless expressly stated otherwise in this transmission, any tax advice contained herein, forwarded with or attached to this message was not and is not intended to be used, nor may it be relied upon or used, by any taxpayer for the purpose of (1) the avoidance of any tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions, or (2) promoting, marketing or recommending to another party any tax transaction or tax-related matters that may be addressed herein.