Navigating Business Vehicle Expenses Tax Deductions

 

Many people wonder, “Can I deduct business vehicle expenses on my taxes?” In short, yes. You can deduct expenses for a vehicle you use for your business. If you use the vehicle for both personal and business purposes, you can deduct only the costs for business use.

How to Calculate Business Mileage Deductions

Use this equation to find your business use percentage:

Business miles you drove ÷ Total miles you drove in the year = Business use

So, what business vehicle expenses can you deduct? You can’t deduct commuting miles — the distance you drive from your home to work. However, you can deduct the cost of traveling from one business location to another.

Use the standard mileage rate or the actual expenses method to figure your expenses.

Standard Mileage Rate Method

woman in carIf you use the standard mileage rate method, multiply the number of business miles you drove by the standard mileage rate. The standard mileage rate for 2019 is $0.58 per mile.

In addition to your standard mileage deduction, you can also deduct:

  • The cost of parking fees and tolls you pay for business. However, you can’t deduct the amount you pay for parking at your place of employment,
  • Your car loan interest that’s related to your business use of the car, and
  • The business portion of personal property taxes you pay on your vehicle. Personal property taxes are taxes you pay based upon the value, not the weight, of your vehicle. (Ex: city excise tax)

You can’t use the standard mileage rate if you:

  • Used the actual expenses method in the first year you placed the car in service
  • Use five or more vehicles in your business at the same time
  • Claim a depreciation deduction for the car using a method other than straight-line
  • Claim Section 179 deduction or bonus deprecation deduction on the car
  • Claim actual expenses after 1997 for a car you leased

Actual expenses method

If you use the actual expenses method, deduct the actual expenses of:

  • Owning your car
  • Operating your car

Actual expenses include:

  • License plates
  • Gas and oil
  • Tolls
  • Insurance
  • Garage rent
  • Parking fees
  • Registration fees
  • Washing and polishing
  • Repairs
  • Tires

You can also deduct depreciation if you own the vehicle.

If you lease a vehicle, you can deduct the lease payments related to the business use of your car. Your vehicle’s fair market value (FMV) might be more than the amount allowed on the lease term’s first day. If so, subtract the lease-inclusion amount from the amount you can deduct as a lease payment. The FMV can’t be more than $50,000 for passenger automobiles, trucks or vans for leases beginning in 2019. For tables with lease-inclusion amounts, see Publication 463: Travel, Entertainment and Gift Expenses at www.irs.gov.

Recordkeeping for Business Vehicle Expenses

Keep these items to support the deductions you claim:

  • Receipts
  • Canceled checks
  • Bills

You should also keep a mileage log to track your mileage for the year. For each trip, log these:

  • Date,
  • Miles traveled,
  • Destination, and
  • Business purpose

Note: Commuting and total mileage should also be tracked.

Get Help with Business Mileage Deductions

Need help navigating business vehicle tax deductions? Whether you make an appointment with one of our knowledgeable tax pros or choose one of our online tax filing products, you can count on H&R Block to help you get back the most money possible.

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