Business Use of Vehicle

A deduction for business use of vehicle is generally available for self-employed individuals.

If you use your car only for business purposes, you may deduct its entire cost of ownership and operation (within certain limits). However, if you use the car for both business and personal purposes, you may deduct only the cost of its business use.

Two Different Methods

If you use your car or truck for business purposes, you can deduct expenses using either the standard mileage rate or actual expenses. You don’t get to choose which method you use in any given year. The decision can be made only in the first year to begin using the standard mileage rate. Both methods apply a deduction based on the business percentage.

Business Percentage

The business percentage is the actual mileage divided by the total mileage for the year. Regardless of the method used, you need to track your total annual mileage and your annual business mileage.

Standard Mileage Rate Method

This method allows a deduction based on a standard mileage rate set by the IRS each year. Actual expenses incurred for the vehicle are not deducted. The only deduction is the standard rate.

Actual Expenses Method

This method allows a deduction based on the actual vehicle expenses incurred during the year. These expenses can include:

  • Depreciation

  • Gas

  • Insurance

  • Lease payments

  • Licenses

  • Oil

  • Parking fees

  • Registration fees

  • Repairs

  • Tires

  • Tolls

Non-deductible Vehicle Expenses

Personal use expenses and fines for traffic violations are not deductible.

If you are looking for a CPA or have any questions about accounting services, please contact me, Catherine Roe, at catherine@cowartroecpa.com or 504-252-0652. I would love to work with you!

Catherine Roe