Do you drive a lot for your job or your business? Are you constantly on the road heading to client meetings or events? If this is you, you’ve probably wondered if you can deduct your car expenses as a tax write-off.

Here’s a breakdown of the criteria you must meet to be able to claim this deduction, and how to go about doing it!

Business Owners

Individuals who are self-employed and use their vehicle for business can deduct car expenses as a business expense on their tax return. If a you use your car for both business and personal purposes, the expenses must be split. The deduction is based on the portion of mileage used for business.

There are two methods for figuring car expenses:

Actual Expense Method

With this method, you track all of your vehicle expenses (listed below). You then take your business use percentage of your car multiplied by your total car expense, and that is your deduction! These vehicle expenses include:

• Depreciation of purchase price
• Lease payments
• Gas and oil
• Tires
• Repairs and tune-ups
• Insurance
• Registration fees

Standard Mileage Rate

With this method, it is much simpler. You just track how many business miles you drive during the year and then multiple that by the standard mileage rate to get your deduction. The standard mileage rate in 2023 is 65.5 cents.

Below are some important notes to remember:

• Commuting miles to and from your office or co-working space does not count as business mileage.
• If you want to use the standard mileage rate for a car you own you must choose to use this method in the first year the car is available for use in your business.
• If you want to use the standard mileage rate for a car you lease you must use it for the entire lease period.
• If your business is taxed as an S-Corporation, you have to capture your auto deduction as part of an Accountable Plan.

Regardless of which method you choose, you need to keep a log of your total miles driven, as well as your business miles driven.

So do yourself a favor a use a mile tracking app to keep track of your business miles. We LOVE the app MileIQ.

Employees

Employees who use their car for work can no longer take an employee business expense deduction as part of your miscellaneous itemized deductions reported on Schedule A.  Employees can’t deduct this cost even if your employer doesn’t reimburse you for using your own car.

However, certain taxpayers may still deduct unreimbursed employee travel expenses, including Armed Forces reservists, qualified performing artists, and fee-basis state or local government officials.

If you have questions about how you can deduct your vehicle expenses, be sure to reach out!