TaxTalk: Car and Truck Expenses
If you use your car or truck in your
business, you can deduct the costs of operating and maintaining your
vehicle. You can deduct expenses for local transportation and traveling
away from home overnight on business.
Local transportation. You can deduct
local transportation expenses when you drive from one workplace to another
within your tax home area. Generally, your tax home is your regular place
of business, regardless of where you maintain your family home. It
includes the entire city or general area in which your business is
located.
You cannot deduct the costs of driving your
car or truck between your home and your main or regular workplace. These
costs are personal commuting expenses.
Your workplace can be your home if you have
an office in your home that qualifies as your principal place of business.
See Publication 587, Business Use of Your Home (Including Use by Day-Care
Providers), for information on determining if your home office qualifies
as a principal place of business.
Methods for Deducting Car and Truck
Expenses
For local transportation or overnight
travel by car or truck, you generally can deduct either:
- Your actual expenses, or
- The standard mileage rate.
Actual expenses. If you deduct
actual expenses, you can deduct the cost of the following items;
depreciation, lease fees, rental fees, garage rent, licenses, repairs,
gas, oil, tires, insurance, parking fees, tolls .
If you use your vehicle for both business
and personal purposes, you must divide your expenses between business and
personal use.
Standard mileage rate. Instead of
figuring actual expenses, you may be able to use the standard mileage rate
to figure the deductible costs of operating your car, van, pickup, or
panel truck for business purposes. You can use the standard mileage rate
only for a vehicle that you own. The standard mileage rate in 2005 is 40.5
cents for all business miles. To figure your deduction, multiply your
business miles by 40.5 cents.
If you choose to take the standard mileage
rate, you cannot deduct actual expenses except for business-related
parking fees and tolls.
If you want to use the standard mileage
rate for a car or truck, you must choose to use it in the first year you
place the vehicle in service in business. In later years, you can choose
to use the standard mileage rate or actual expenses, subject to special
rules.
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