Tax Deductible Car And Truck Expenses

11 Jul, 2023


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It’s not always easy to know whether you’ll be able to deduct your vehicle expenses. This can be a tricky distinction when you use the same vehicle for both business and pleasure, but it’s an important one to make. To raise less flags, you should aim to start off claiming your car the moment you get it, so that it doesn’t create any questionable deductions for the IRS. In the tax game it’s all about consistency to not make your actions stand out, and that’s an important thing to remember. When you purchase a vehicle, think in terms of how you’re going to be using your vehicle, and make sure to keep inscrutable records in regards to how you drive. Keep receipts for gas, maintenance, and all other details regarding your car, so that if you are ever questioned by the IRS, you will have a bevvy of proof to back up your claims. Here’s an easy guide to help carry you through the process, and hopefully answer any questions you have.

Business Purposes

Individuals who own a business or are self-employed and use their vehicle for business purposes may deduct car expenses on their tax return. If a taxpayer uses the car for both business and personal purposes, the expenses must be split. What defines business purposes? Business purposes include driving from your place of employment to another work site, to meet with clients, or to go to a business meeting. Driving from your home to your workplace doesn't count as a business purpose, and the Internal Revenue Service says that is a commute that's considered a personal expense. But if you maintain an office in your home, traveling from your home office to meet with a client or to conduct business is tax deductible.

Medical Purposes

Transportation and travel costs are generally deductible as a medical expense if they're needed to reach a medical treatment facility. These include travel costs to a doctor’s office, hospital. In short, medical purposes involve driving to obtain medical care for yourself or for your dependents. The drive must be primarily for, and essential to, medical care, according to the IRS.

Moving and Relocating

The cost of driving your car to move to a new residence may be deductible as part of the moving expense deduction if you must relocate for work-related reasons and your new place of employment is at least 50 miles farther from your old home than the distance between your old home and your old job. You must also work for your new employer for at least 39 weeks during the 12 months immediately following your move. Summing it up means: You can deduct reasonable expenses that you incur to transport your personal effects and household items to your new dwelling. You can also include the cost of traveling.

Charitable Purposes

You can deduct car expenses if you use your car when you're providing services to a charitable organization. Driving to perform volunteer services for a church, charity or hospital would be deductible. That means you can deduct car expenses when using your car while working for charitable organizations, and traveling back and forth for them, in any capacity.

Deducting Your Actual Expenses

You aren’t allowed to deduct personal expenses for your car, but you can deduct any travel expenses having to do with business. You can use your actual expenses, which include parking fees and tolls, interest on a vehicle loan, vehicle registration fees, personal property tax on the vehicle, lease and rental expenses, insurance, fuel and gasoline, repairs including oil changes, tires, and other routine maintenance, and depreciation.

Claiming Standard Mileage Rates

Just because you made a claim one year, doesn’t mean that it’s going to be the same write off for the next. The rate varies depending on why you're driving, and are hinged to inflation, so they can go up or down by year. Simply multiply the applicable rate by the number of miles you drove to determine the dollar amount of your deduction. Keep diligent records of the miles you drive in your car and it may help come tax time. On average, you can legally write off .58 cents for every business mile you drive.

Which Is Better – Actual Expenses or the Standard Mileage Rate?

Use the method that results in the larger deduction. This can vary from person to person depending on how many miles you drive, the amount of depreciation you're claiming, and all the other expense variables. Crunch the numbers both ways and figure out which will be best for your tax situation.

Claiming the standard mileage rate will usually mean less paperwork and is best applied for situations in which you drive your car sometimes for work, charity or medical appointments. It also means that you won’t have to tally all of your car-related expense receipts at tax time.

If you opt for using the standard mileage rate, however, you must choose that method in the first year you use your car for business purposes. If you begin by claiming actual expenses, you'll be stuck with that method for as long as the vehicle is being used for business. The actual expenses will likely produce greater tax benefits for newer or more expensive vehicles; mileage treatment is usually better for older or economy vehicles.

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