Car expenses you can and can't claim as a tax deduction | finder.com

What vehicle tax deductions can I write off?

Using your own car for work? Find out what expenses you can claim and what tax deductions you may be eligible for.

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You don’t want Uncle Sam coming after you at tax time, so it’s important to understand exactly what you can and can’t claim on your taxes when it comes to your vehicle. Working out your tax deductions can be tedious — and confusing — but it’s worth the savings to count as many deductions as possible.

Who can deduct vehicle expenses?

If you’re self-employed or own your own business and you use your car for business purposes, you can deduct the cost of its operation from your taxes. But if you’re employed by a company or person and you use your car on the job, those are considered unreimbursed expenses, which can’t be deducted.

You’re also limited to deducting vehicle expenses over 2% or your adjusted gross income.

How do I calculate how much I can deduct?

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.

Standard mileage rate

If you calculate your deduction based on the standard deduction rate, you’ll need to track how many miles you’ve driven your car for business purposes. Then multiply your mileage by the standard mileage rate set by the IRS. For 2019, the standard mileage rate is 58 cents per mile.

Actual expenses

If you calculate your deduction based on actual expenses, you’ll need to keep receipts for everything you spend on your car and then add it all up at the end of the year. Common vehicle expenses include:

  • Gas
  • Oil
  • Insurance
  • Registration
  • Licenses
  • Repairs
  • Depreciation
  • Loan interest

Example: Standard mileage rate vs. actual expenses

In the past year, Dave drove 20,000 miles, and 15,000 of those miles were for work. Dave kept track of both his mileage and expenses so that he’d be able to calculate how much he can deduct using both methods at tax time.

Standard mileage rate

Dave drove 15,000 miles for work. In 2019, he can deduct $0.58/mile.

15,000 x $0.58 = $8,700

Actual expenses

After gathering up all of his receipts, Dave calculates that he spend $8,000 on his car, including gas and maintenance. Since 75% of the miles he drove were for work, he’ll be able to deduct 75% of those costs.

$8,000 x $0.75 = $6,000

Dave will be able to deduct more using the standard mileage rate. But that’s not always the case. If Dave’s car would’ve had a major repair, he may have been better off deducting the actual cost.

IRS standard mileage rates by year

YearBusinessCharityMedical/moving
2009$0.55/mile$0.14/mile$0.24/mile
2010$0.50/mile$0.14/mile$0.165/mile
January to June 2011$0.51/mile$0.14/mile$0.19/mile
June to December 2011$0.555/mile$0.14/mile$0.235/mile
2012$0.555/mile$0.14/mile$0.23/mile
2013$0.565/mile$0.14/mile$0.24/mile
2014$0.56/mile$0.14/mile$0.235/mile
2015$0.575/mile$0.14/mile$0.23/mile
2016$0.54/mile$0.14/mile$0.19/mile
2017$0.535/mile$0.14/mile$0.17/mile
2018$0.545/mile$0.14/mile$0.18/mile
2019$0.58/mile$0.14/mile$0.20/mile

What expenses can’t I claim?

You can’t deduct:

  • Driving your car for any personal reason.
  • Your commute to and from work.
  • Fines for traffic tickets.
  • Expenses accounting for less than 2% of your adjusted gross income
  • Mileage or costs when driving a car when you’re employed by another person or business
  • Hire a professional. Tax laws can be tricky, and there’s often a fine line between what’s considered personal and business use. For example, if you have no permanent office, driving within your metropolitan area for work may not be deductible. A certified accountant can help you maximize your deductions without getting into trouble with the IRS.

Tax benefits for electric cars

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.

Additional expenses you can deduct

Come tax time, consider claiming these expenses:

  • Charity expenses. For 2019, you can deduct 14 cents per mile if you’re driving for a charity.
  • Moving expenses. For 2019, you can deduct 20 cents per mile for moving purposes. But unless you’re a member of the military, you can no longer deduct other moving expenses.
  • Medical expenses. For 2019, you can deduct 20 cents per mile if you’re driving for a medical reason.
  • Parking fees. These can be deducted separately regardless of whether you calculate your deductions based on the standard mileage rate or your actual expenses.
  • Tolls. These can be deducted separately regardless of whether you calculate your deductions based on the standard mileage rate or your actual expenses.

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Bottom line

To maximize your vehicle deductions, keep track of your business and personal mileage along with any receipts for vehicle-related expenses. And to make sure you’re getting the best deductions without running afoul of any tax laws, check with the IRS and consider hiring a professional to help you put together your tax return.

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