Tracking and Deducting Car Expenses

If you use your car for business purposes, you ordinarily can deduct car expenses. You generally can use one of the two following methods to figure your deductible expenses.

• Standard mileage rate.
• Actual car expenses.

For discussion purposes, “car” includes a van, pickup, or panel truck.

STANDARD MILEAGE RATE

You may be able to use the standard mileage rate to figure the deductible costs of operating your car for business purposes. For 2016, the standard mileage rate for the cost of operating your car for business use is 54 cents per mile. 

If you use the standard mileage rate for a year, you cannot deduct your actual car expenses for that year. You cannot deduct depreciation, lease payments, maintenance and repairs, gasoline (including gasoline taxes), oil, insurance, or vehicle registration fees.

You generally can use the standard mileage rate whether or not you are reimbursed and whether or not any reimbursement is more or less than the amount figured using the standard mileage rate. Choosing the standard mileage rate. If you want to use the standard mileage rate for a car you own, you must choose to use it in the first year the car is available for use in your business. Then 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 use it for the entire lease period. 

ACTUAL CAR EXPENSES

If you do not use the standard mileage rate, you may be able to deduct your actual car expenses. If you qualify to use both methods, you may want to figure your deduction both ways to see which gives you a larger deduction. Actual car expenses include:

• Depreciation
• Garage rent
• Gas
• Insurance
• Lease payments
• Oil
• Parking fees
• Registration fees
• Repairs
• Tires
• Tools

If you have fully depreciated a car that you still use in your business, you can continue to claim your other actual car expenses but you must continue to keep records. Business and personal use. If you use your car for both business and personal purposes, you must divide your expenses between business and personal use. You can divide your expense based on the miles driven for each purpose.



Phil Chandler, CPA, MBA is a principal with Leblanc & Chandler, CPA and a speaker, author and consultant on topics regarding tax, bookkeeping, accounting and business management.  His education in accounting and engineering as well as background in accounting, construction and real estate provide him unique insights in what it takes to run successful businesses, especially in those specific industries.