Deducting Car Expenses That You Incur On Your Job

Written by Milton Boothe | Posted in Tax Deductions

If you use your own car, van, pickup, or panel truck, for the purposes of performing your duties on your job, you can claim a deduction for the use of your vehicle. You can claim EITHER the standard mileage rate OR the actual expenses for operating your vehicle on the job. Obviously, you should use whichever method will result in a larger deduction.

The standard mileage rate is a rate allowed per mile for every business mile traveled. For tax year 2014 you can claim mileage at a standard rate of 56 cents per mile for each business mile traveled. You cannot claim the standard rate if:

• You used the car for hire (for example, as a taxi).
• You operate five or more cars at the same time.
• You claimed depreciation, or claimed a Section 179 deduction in an earlier year.
• You are a rural mail carrier who received a qualified reimbursement.

Generally speaking, claiming the standard mileage rate, results in less paperwork and is best suited for situations in which you drive your car sometimes for work, charity or for various other purposes. It avoids the need for you having to keep detailed records for each activity.
You need to be aware, however, that in order to claim the standard mileage rate, you will need to choose that method in the first year that you use your car for business purposes. If you begin by claiming actual expenses, you’ll need to stick with the actual expense method for as long as the vehicle is used for business purposes.

If you opt to claim your actual expenses, you must first of all ascertain your total expenses, and then divide your total expenses between business use and personal use, based on the number of miles driven for each purpose.
Your actual expenses that can be deductible include the following:

• The cost of lease payments.
• Tires, gas, oil.
• Insurance, registration fees, and licenses.

You can, however, claim your business related parking fees and tolls as an additional deduction, regardless of whichever method you use.

If you are an employee, you cannot deduct any interest that you paid on a car loan. This applies even if the car is used 100% for business. However, if you are self-employed you can deduct the part of the interest expense that represents the business use of the car.

The cost of traveling between home and regular job is considered commuting expenses and is not deductible. If you have two workplaces, you can deduct the cost of traveling from one workplace to the other.

The primary objective of this article is to empower taxpayers to learn to do their own taxes. For detailed information on how to deduct your employee business expenses, grab yourself a copy of “Doing Your Own Taxes is as Easy as 1, 2, 3,” on TaxConnections.com

Milton Boothe

Milton G Boothe is an IRS Enrolled Agent with over twenty years of tax and financial accounting experience, including several years at PricewaterhouseCoopers. He is also a British certified Chartered Accountant. He is currently employed in private tax practices where he helps people resolve their tax problems, minimize their taxes, and routinely represents the interests of taxpayers before the Internal Revenue Service. As an Enrolled Agent (EA) Boothe is a federally-authorized tax practitioner who has technical expertise in the field of taxation and who is empowered by the U.S. Department of the Treasury to represent taxpayers before all administrative levels of the IRS for audits, collections, and appeals.
Milton G Boothe is also the author of several tax publications, wherein he encourages people to empower themselves by learning to do their own taxes.