CAR RELATED TAX DEDUCTIONS
You may be thinking about preparing your taxes as we are getting closer to the April 15 deadline. What you may not know is your car can save you money come tax-time. There are some common car-related tax deductions available. While some people fill out their tax return themselves, many go to professionals (such as an accountant) for help. Either way, be sure to gather your receipts and documents in preparation for that important meeting. Read on to learn what to discuss with your accountant or other tax professional.
If you use your car exclusively for business, you can deduct car expenses, according to the IRS website. This tax deduction applies if you own your own business, are a freelancer or entrepreneur. Car deductions are for a car, van, pickup or panel truck used for business according to the IRS website.
If you use your car for both business and personal purposes, you must divide your expenses based on actual mileage. Note: costs related to travel between a taxpayer’s home and regular place of work are commuting expenses and are not deductible.
Leasing a business vehicle. If you lease a cars for business, the entire lease payment can be deducted from the taxable income. In some cases they can combine this with individual deductions, such as operating costs.
There are other less common vehicle deductions that might apply to you.
If you own a rental property, you can deduct mileage driving to and from it. Driving to and from charitable or volunteer events allows for a 14 cent per mile deduction. Traffic and parking tickets do not qualify. When you are working and on company time, those are your responsibility, not your employer’s.
Taking a business class or workshop? You can also deduct the miles you drive to qualifying professional development classes and workshops that help you maintain or improve your job skills. The course or courses are required by your employer or law to keep your present salary. You must itemize these costs on your tax return. Check the IRS website for the correct form.
Have job interviews last year? The standard mileage deduction may apply to your travel while looking for a new job.
The trip must be directly related to your job search. You can’t include miles driven while on a shopping trip that same day. You must itemize your deductions and claim them as a unreimbursed expense.
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.