Deducting Car and Truck Expenses
If you use your car or truck in your business, you can deduct the costs of operating and maintaining your vehicle. You can deduct expenses for local transportation and traveling away from home overnight on business.
Local Transportation Expenses
Local transportation expenses include the ordinary and necessary costs of all of the following:
- Getting from one workplace to another in the course of your business or profession when you are traveling within the city or general area that is your tax home. Tax home is defined later.
- Visiting clients or customers.
- Going to a business meeting away from your regular workplace.
- Getting from your home to a temporary workplace when you have one or more regular places of work. These temporary workplaces can be either within the area of your tax home or outside that area.
Local business transportation does not include expenses you have while traveling away from home overnight. Those expenses are deductible as travel expenses and are discussed later under Travel, Meals, and Entertainment. However, if you use your car while traveling away from home overnight, use the rules in this section to figure your car expense deduction.
Generally, your tax home is your regular place of business, regardless of where you maintain your family home. It includes the entire city or general area in which your business or work is located.
Note: You cannot deduct the costs of driving your car or truck between your home and your main or regular workplace. These costs are personal commuting expenses.
Office in the home: Your workplace can be your home if you have an office in your home that qualifies as your principal place of business.
Methods for Deducting Car and Truck Expenses
For local transportation or overnight travel by car or truck, you generally can use one of the following methods to figure your expenses:
- Standard mileage rate
- Actual expenses
Standard Mileage Rate
You may be able to use the standard mileage rate to figure the deductible costs of operating your car, van, pickup, or panel truck for business purposes. For 2013, the standard business mileage rate is 56.5 cents a mile. See IRS information for medical, charitable, and moving mileage rates.
If you choose to use the standard mileage rate for a year, you cannot deduct your actual expenses for that year except for business-related parking fees and tolls.
Choosing the Standard Mileage Rate
If you want to use the standard mileage rate for a car or truck you own, you must choose to use it in the first year the car is available for use in your business. In later years, you can choose to use either the standard mileage rate or actual expenses.
If you want to use the standard mileage rate for a car you lease, you must choose to use it for the entire lease period. For leases that began on or before December 31, 1997, the standard mileage rate must be used for the entire portion of the lease period (including renewals) that is after that date.
Standard Mileage Rate Not Allowed
You cannot use the standard mileage rate if you:
- Use the car for hire (such as a taxi)
- Operate two or more cars at the same time
Parking Fees and Tolls
In addition to using the standard mileage rate, you can deduct any business-related parking fees and tolls. (Parking fees that you pay to park your car at your place of work are nondeductible commuting expenses.)
If you do not choose to use the standard mileage rate, you may be able to deduct your actual car or truck expenses.
If you qualify to use both methods, figure your deduction both ways to see which gives you a larger deduction.
Actual car expenses include the costs of the following items.
|Depreciation||Lease Payments||Registration Fees|
If you use your vehicle for both business and personal purposes, you must divide your expenses between business and personal use. You can divide based on the miles driven for each purpose.
For more information about the rules for claiming car and truck expenses, see Publication 463, Travel, Entertainment, Gift, and Car Expenses.
Reimbursing Your Employees for Expenses
You generally can deduct the amount you reimburse your employees for car and truck expenses. The reimbursement you deduct and the manner in which you deduct it depend in part on whether you reimburse the expenses under an accountable plan or a nonaccountable plan. For details, see chapter 16 in Publication 535, Business Expenses. That chapter explains accountable and nonaccountable plans and tells you whether to report the reimbursement on your employee’s Form W-2, Wage and Tax Statement.
Source: IRS Publication No. 334