Vehicle Tax Deduction: What Can You Claim?
Editor’s Note: This post was updated on July 17, 2016 to reflect updated IRS information using the 2016 Standard Mileage Rate deduction. Read on to learn deductions for using your vehicle.
Many people know that if you use your car or truck for business, you can deduct some of the costs associated with the vehicle on your tax return. But did you also know you might be able to itemize use of a vehicle when it’s associated with medical costs, charitable work or a move?
Here are some opportunities for savings that you might not be aware of when it comes to the vehicle tax deduction:
If you use your vehicle for business – to visit clients on a regular basis, not to commute to an office, for example – here’s an opportunity to deduct the cost of operating the vehicle throughout the year. You have the choice of using your actual cost (keeping every last receipt for gas, maintenance, etc.), or using the standard mileage rate.
Each year the standard mileage rate deduction changes. In 2016, the standard for business travel is 54 cents per mile for business miles driven, down from 57.5 cents in 2015.
When traveling or commuting for business, keep notes documenting the business nature of the miles you are using.
- If you choose the actual expense method in the first year the vehicle is available for business use, you must use the actual expense method for that vehicle in all following years.
- If you choose the standard mileage rate in the first year, you can use either method for any of the following years. However, if you choose the standard mileage rate for a vehicle you are leasing, you must stay with this method for the full term of the lease.
For an in-depth discussion of what use of your vehicle is deductible as a business expense see IRS Publication 463.
The cost of transportation to doctor visits, or to receive required medical treatment at a hospital, is also a deduction. This includes not only the cost for your own vehicle, but also for a taxi, bus, train, plane or ambulance. If you use your own vehicle, you can choose between your actual expenses or use the medical mileage rate of 19 cents per mile, which dropped from 23 cents in 2015. All other forms of transportation will require you to claim your actual expenses.
Keep track of tolls and parking, as these are also tax deductible!
Similar to medical expenses, you may deduct 19 cents per mile driven for medical purposes. But the ability to deduct moving expenses comes with a few rules:
- The move must be related to work in terms of both time and distance.
- The new job location must be at least 50 miles further away from your old residence than your previous job.
- The house move must occur within a year of the job move.
As valuable as your time may be, there’s no deduction for it on your taxes. However, you may deduct actual vehicle expenses, such as gas and oil, directly related to getting to and from a charity event or 14 cents per mile driven for charitable work. This is the one transportation cost that’s not adjusted by the IRS each year, but is changed from time-to-time directly by Congress. This deduction is only available if you itemize, as it’s taken on Schedule A in the same section as your other charitable deductions.
Each year, the IRS issues a notice, typically in early December, with the rates in effect for the next year, so check each year for updates.
If the way you use your vehicle fits with any of the above categories, hopefully you have an extra opportunity for a vehicle tax deduction or two. We hope these tips will offer a smooth ride when filing your taxes!
Do you have unreimbursed expenses to include on your tax return? Learn how to claim unreimbursed employee expenses with IRS Form 2106.
An ITIN is issued by the IRS to help people file taxes without a Social Security number. Learn how to get an ITIN number, who qualifies, and where to apply.
Changing jobs can come with tax implications like job search and moving expense deductions. Learn more about these potential benefits at H&R Block.
If you’re itemizing deductions, the IRS generally allows you a medical expenses deduction if you have unreimbursed expenses that are more than 7.5% of your adjusted gross income for tax years 2017 or 2018. You can deduct the cost of care from several types of practitioners at various stages of care.