Business Use of Car
If you use your vehicle for your job or business, you can deduct
expenses related to the cost of operating it. If the car is used
for both personal and business reasons, you can only deduct the
portion of expenses that relate to the business use of your
vehicle.
You cannot deduct any expenses related to commuting from your
home to your place of work. However, you can deduct the expenses of
commuting from one job to another.
Qualifying Expenses
The amount of deductible car expenses can be determined two
different ways: standard mileage rate or actual expense. You must
keep adequate records supporting your deduction regardless of the
method you choose.
Standard Mileage Rate Method
The 2012 standard mileage rate is 55.5 cents per mile. To use
the standard mileage method, you must meet these requirements:
- You must own or lease the vehicle.
- You must not have claimed any method of depreciation except
straight-line in previous years (on this vehicle).
- You cannot operate more than five cars, as in a fleet
operation.
- You must not have claimed a Section 179 deduction on the
vehicle.
- You must not have claimed actual expenses on a leased car after
1997.
- You are not a rural mail carrier who receives qualified
reimbursements.
- You must use the standard mileage rate the first year your
vehicle is used for business purposes.
- You must use the standard mileage rate for any vehicle you
lease.
Actual Expense Method
- You must determine what it actually costs you to operate the
car for business purposes.
- Qualifying expenses include gas, oil, repairs, tires,
insurance, registration fees, licenses, and depreciation.
- Expenses such as parking fees and tolls are deductible as a
separate expense.
Reimbursed Expenses
If your employer reimburses your vehicle expenses, the expenses
may or may not be deductible, depending on the type of plan your
employer uses to reimburse you.
Non-Accountable Plan
- You are not required to prove your expenses to receive
reimbursement.
- Reimbursements should be included in your wages.
- Reimbursements included in wages are deductible.
Accountable Plan
- Expenses are incurred while performing services as an
employee.
- Expenses must be accounted for in a reasonable period of
time.
- Excess reimbursements must be returned in a reasonable period
of time.
- Reimbursements should not be included in your wages.
- Reimbursed expenses are not deductible.
- Expenses not reimbursed are deductible.
For more information see IRS
Publication 463.