Automobile Tax Expenses

If you use a vehicle for conducting business, you can deduct certain vehicle tax expenses from your tax bill. This is true even if you use the vehicle for personal and business needs.

Automobile Tax Expenses 

The powers that be have historically written sections into the tax code promoting business activities.  One of the traditional write-offs has always been the expenses for using a car for business purposes. 

The simplest automobile tax expense situation is one where a vehicle is used completely for business.  For instance, if you own a van and it is used for a delivery services and not for personal use, all expenses related to the van could be claimed.  This is referred as the exclusive use situation.  For numerous small businesses, however, a vehicle will be used for both personal and business reasons. 

In the case where you have a vehicle used for personal and business purposes, you can only deduct the automobile expenses related to the business use.  Bear in mind that driving to and from work is not considered a business mileage, whereas driving from an office to meet a client is considered business mileage and can be written off. 

There are two ways for determining deductible automobile tax expenses.  The first is a simple calculation called the standard mileage deduction.  The second is the actual mileage expense method.  You can select whichever car tax deduction method provides you with the biggest deduction except if you lease the vehicle.  With a car lease, you must use the standard mileage deduction. 

The standard mileage rate deduction is a calculation wherein you multiply your total business miles for the year by the most current figure given by the IRS.  These figures will be different every year, depending on the gas prices at the time.  For the first six months of 2011, the number provided by the IRS was 51 cents per mile.  For the last six months of 2011, the number was increased to 55.5 cents to reflect high gas prices during this period. 

The actual cost expense option is precisely what it sounds like.  It is the actual cost associated with using the vehicle for tax purposes for a particular tax year.  Car tax expenses may include gas, tires, repairs, oil changes, registration costs, licensing, insurance and all that.  In a lot of cases, the actual expense deduction will end up being larger than the standard mileage deduction. 

Irrespective of the method you choose, you must document the automobile tax expenses.  This means keeping a mileage log and receipts of anything you intend to deduct.