Your automobile may provide several automobile tax deductions that may lower your income tax. As with all deductions, it’s important to maintain accurate records of your expenses.
Record Keeping
Keep accurate records of the miles incurred for business purposes, dates of business use, destinations and business purpose.
Record odometer readings start January 1 and end December 31st for all uses. Tip: Download an app on your phone or keep a logbook in your vehicle’s glove box for recording the mileage. You’ll be able to calculate your mileage at the end of the year easily.
The important aspect is to make sure you maintain accurate records. The IRS may disallow a deduction for mileage if you are unable to substantiate your deduction.
If you use the standard mileage rate, you cannot use your actual expenses.
Business Automobile Tax Deductions
You cannot deduct commuting mileage—that is, mileage from your home to your regular job. However, if you are self-employed and maintain an eligible office in your home, you can deduct the mileage to and from a client’s or customer’s place of business, as well as between jobs.
Employees can deduct mileage between jobs or to a temporary assignment. The IRS defines a temporary work assignment as lasting a few days or weeks but less than a year.
If you do not have a regular place of business, you can only deduct your transportation expenses to a temporary location outside your general area of employment.
You can generally deduct your transportation expenses to attend meetings if you are an Armed Forces Reservist. The meetings must take place on a day that you usually work. You cannot deduct expenses for transportation on a day you normally do not work. You can deduct your travel expenses if you travel and stay overnight to attend a Guard or Reserve meeting.
Medical Mileage
If you used your car to obtain medical care in 2022, the medical standard mileage rate is 22 cents per mile. Medical care includes trips to the doctor’s office, dentist’s office or to the hospital to obtain medical treatment. Parking fees and tolls associated with medical treatment are also deductible.
If you choose to use actual car expenses, you can only deduct the cost of gas and oil, not depreciation, repairs, etc. Your tax preparer will add these expenses to your other medical expenses and deduct them on Schedule A, subject to the normal limitations.
Charitable Mileage
You can deduct 14 cents per mile if you use your car for charitable purposes. You can also deduct parking fees and tolls.
If you choose to use actual expenses, you are again limited to unreimbursed expenses for gas and oil.
You cannot deduct mileage or expenses for charitable purposes if a significant part of the travel is for personal pleasure.
Expenses
There are two ways to calculate your auto deductions: the standard mileage rate or actual expenses. These methods are available whether you own or lease your vehicle.
Actual Expense Method.
Actual expenses such as the cost of gas, oil, insurance, repairs, maintenance, tires, washing, licenses and depreciation or lease payments are eligible. You can also deduct the cost of business related parking fees, tolls and state and local taxes not paid with the acquisition or disposition of the vehicle. If you are self-employed, the business percentage of the interest on your car loan is also deductible. The actual expense method requires you to save all receipts and keep very detailed records. If you use your car for personal and business purposes, you’ll have to divide the expenses between the personal and business portion.
Example: If you use your car 50% of the time for business and 50% of the time for personal reasons, you’ll only be able to deduct 50% of the cost of your eligible expenses.
Business Standard Mileage Rate
In response to rising gas prices, the IRS increased the business standard mileage rate for the last six months of 2022. For Jan. 1–June 30, 2022, it’s 58.5¢ per mile, and for July 1–Dec. 31, 2022, it’s 62.5¢ per mile. If you meet certain requirements, you can choose to use the business standard mileage rate to deduct the cost of operating your automobile for business instead of tracking actual costs. However, you must have adequate records that document the time, place, business purpose and number of miles for each trip. You cannot divide total business miles for the year in half or allocate more miles to the second half of the year when the rate is higher. IRS Pub. 463, Travel, Gift, and Car Expenses contains a daily business mileage and expense log. Several apps track business mileage as well.
