Ask the Taxgirl: Automobile Deductions

by Kelly on November 30th, 2006

Taxpayer asks: I read your advice about deductions for business expenses but I don’t use a home office or some of the other things you mentioned. I do, however, use a car for much of my work. Can I deduct that?

Taxgirl says: If you use your car exclusively in your business, you can deduct car expenses. You just need to figure out how much.

If you use your car for business and personal use, you must pro rate the expenses based on actual mileage. You can deduct car expenses, including depreciation or lease payments, gas and oil, tires, repairs, tune-ups, insurance, and registration fees in proportion to your business use. So, let’s say you drove 50,000 miles this year, 30,000 miles of which were for business. That’s 60% of your total miles for business. So, add up the expenses attributable to your car and 60% of those expenses may be properly deducted on your return.

Alternatively, you may be able to use the standard mileage rate to figure your deduction (for tax year 2007, it’s a whopping 48.5 cents per mile).

Even better, if you are self-employed, you can deduct the business part of interest on your car loan, state and local personal property tax on the car, parking fees, and tolls, even if you claim the standard mileage rate. For more info on car expenses, check out IRS Publication 463.

Like any good lawyer, I need to add a disclaimer:
Unfortunately, it is impossible to give comprehensive tax advice over the internet, no matter how well researched or written. Before relying on any information given on this site, contact a tax professional to discuss your particular situation.