Do you use your car for business purposes?
If you use an automobile for business, you may be able to receive a tax deduction to lower your income tax. Deducting auto expenses requires diligent recordkeeping and accurate calculations. There are two ways to calculate your auto deductions:
• Actual expenses. Track all eligible deductions, such as the cost of gas, oil, repairs, insurance, maintenance, tires, washing, licenses and depreciation or lease payments.
• Standard mileage rate. Instead of tracking the above expenses, track the business mileage you accrue and use a standard rate. For 2015, the standard mileage rate is 57.5 cents per mile.
Whether you own or lease your vehicle, both of these methods are viable options. Taxpayers who wish to use the standard mileage rate in lieu of actual expenses for computing deductible vehicle expenses must elect to do so in the first year of business use. Switching to the standard mileage rate in a later year is not an option.
To receive these deductions, you must keep accurate records of the miles incurred for business, dates of business use, destinations and the business purpose. You’ll also need to note the odometer readings at the beginning and end of the year to determine the total miles for all uses. If records are not accurate enough and you are not able to substantiate your claim, the IRS may disallow a deduction for mileage.
Please note that you cannot deduct commuting mileage—that is, mileage from your home to your regular job. However, if you’re self-employed and maintain an eligible office in your home, you can deduct the mileage to and from your clients, as well as between jobs. You can also deduct mileage between jobs or to a temporary assignment. If you don’t have a regular place of business, you can only deduct your transportation expenses to a temporary location outside of your general area of employment.