Common Car Related Tax Deductions
You may be thinking about preparing your taxes as the April 15 deadline nears. There are some common car-related tax deductions available. Read on to learn more.
If you use your car exclusively in your business, you can deduct car expenses, according to the Turbo Tax website. If you use your car for both business and personal purposes, you must divide your expenses based on actual mileage. Car deductions are for a car, van, pickup or panel truck used for business according to the IRS website.
It is important to note that costs related to travel between a taxpayer's home and regular place of work are commuting expenses and are not deductible.
If you drive from your usual work site to another job-related destination -- a sales meeting, to get office supplies, or to the airport -- those miles may be deducted. For example: if you have been temporarily reassigned to another work location that is farther from home, you can deduct the extra distance. However, If your employer reimburses you for mileage, you cannot deduct these expenses on your taxes.
If you use your car exclusively for work then you can deduct 100% of your expenses. This includes gas, registration fees, maintenance, insurance, parking fees and more. Be sure to keep your receipts and keep track of your car expenses.
Also, if you're in a car accident that isn't your fault, and the other driver's insurance doesn't fully reimburse you for the damage to or loss of your car, you may get a deduction for that unreimbursed amount as a casualty loss. This also applies if the car is repaired but is no longer worth as much as it had been because of its accident history.
For updated information, refer to IRS Publication 463, Travel, Entertainment, Gift, and Car Expenses. For a list of current-year and prior-year mileage rates see "Standard Mileage Rates." There's a separate table for those who lease their vehicles. If you are self-employed, you may either deduct your exact expenses or use the optional standard mileage rate to calculate deductions.
We recommend consulting with a tax professional to learn more.