Using your own car for work? Find out what expenses you can claim and what tax deductions you may be eligible for.
This guide helps you determine your options of what you can claim with it comes to your car.
What car costs can I claim on my taxes?
If you use your car for work, you can claim any work-related expenses, including:
- Personal property tax
- Loan interest
It’s important to keep in mind that you can only make these deductions for business related costs.
When you purchase an electric vehicle, the federal government offers a tax credit between $2,500 and $7,500 depending on the size of the battery and vehicle — and some states like California offer even more incentives.
Car expenses that are often overlooked
Here are some other less obvious ways to write off expenses from your car.Come tax time, consider claiming these expenses:
- If you rent out a property, write off gas and milage each time you drive there.
- Gas and milage for volunteer work or nonprofit board meetings (14 cents per mile).
- If you use your car in part of a business (food truck, mobile car-wash, traveling photo booth).
- Gas and milage for for job hunting.
- If you move more than 50 miles away for a job, you can deduct the miles incurred when moving.
- If your medical expenses account for more than 7.5% of your adjusted gross income, you can claim health-related travel costs.
- Miles driven to the bank, office supply store, computer store, to meet with your accountant or to meet with your lawyer on business matters.
What expenses can’t I claim?
- Driving your car for any personal reason.
- Your commute to and from work.
- Fines for traffic tickets.
- Completing small tasks required by your employer on the way to work (picking up the mail or other deliverables).
Standard mileage rate vs. cost of actual expenses
The IRS allows expenses to be claimed in two different ways, the standard mileage rate and the cost of actual expenses. Before claiming anything on your taxes, it’s best to sit down with a calculator to figure out which method will benefit you the most. As of 2018, the standard mileage rate is $0.545 per mile driven.
Be sure to keep a record and hold on to expense receipts when it comes to your car. And to differentiate from your work related and personal use of the car, keep a logbook of your recorded miles for the year. Do this by writing down your odometer reading at the beginning of the year and tracking the exact mileage of each work related trip.
Standard mileage rate
If you drove 20,000 miles and 15,000 were purely for business, you used your car 75% of the time for work. The total amount that you could deduct would be $8,175 ($0.545 x 15,000).
It’s important to know that you’re ineligible to use the standard milage rate if the car is used for hire (taxi, Uber) or you have a fleet of five or more cars.
Cost of actual expenses
After you’ve gathered all of your receipts for the year and have calculated the cost of tolls, gas and repairs, your total expenses have added up to $8,000. Using the car 75% of the time for work, you can deduct $6,000 (75% of $8,000) for the year.
In this case, the standard mileage rate gives you a bigger write off. But that’s not always the case. When deciding on how your want to claim your expenses, consider:
- Vehicle gas mileage.
- How far your business trips are.
- How costly your vehicle expenses are.