Why YOU Should Care:
Using your car for business purposes (e.g, driving to a craft fair or convention)? You may qualify to deduct some of the expense.
The IRS allows a deduction of the miles travelled for business purposes multiplied by a standard mileage rate. You may also chose to deduct actual costs of using your automobile for business purposes, but the standard mileage rate is often a simpler calculation.
This mileage deduction is computed annually using the standard mileage rate in lieu of calculating and deducting the fixed and variable costs of the business use of the car. This means that if you are using the standard mileage rate, you do not get to allocate a percentage of depreciation, lease payments, maintenance and repairs, tires, gasoline, oil, insurance, and license and registration fees as a business deduction as well.
Items such as tolls and parking fees related to business use of the car are still deductible business expenses, regardless of whether or not you choose to use the standard mileage rate. Additionally, a percentage of the interest related to the purchase of the automobile and state and local personal property taxes are also deductible.
Mileage rates generally change annually, so look for an updated amount from the IRS. Beginning on January 1, 2012, the standard mileage rate is 55.5 cents per business mile driven.
If you claim this deduction, you must be able to substantiate it. This means having verification for both the amount of miles traveled and the purpose for that travel. Specifically, the deduction is not allowed unless you document:
- The number of miles driven
- The time and place of travel
- The business purpose of the travel