Under certain circumstances
a taxpayer can claim a deduction
for using their vehicle for business purposes. If you use your car for business
purposes, you ordinarily can deduct car expenses using either the standard
mileage rate or actual expenses.
Use of a vehicle qualifies as business use under all of the
following.
• Getting
from one workplace to another in the course of a taxpayer’s business or
profession when the taxpayer is traveling within the city or general area that
is the taxpayer’s tax home.
• Going to
a business meeting away from the taxpayer’s regular workplace.
• Getting
from home to a temporary workplace when the taxpayer has one or more regular
places of work. These temporary workplaces can be either within the area of the
taxpayer’s tax home or outside that area.
Temporary Work Location
A temporary work location is a work location that is
realistically expected to last, and does in fact last, for one year or less.
Commuting from home to a temporary work location is deductible only if the
taxpayer has one or more regular work locations, or the temporary work location
is outside the taxpayer’s tax home area.
Two Places of Work
If a taxpayer works two jobs in one day, whether or not for
the same employer, the expense of getting from one workplace to the other is
deductible. However, if a taxpayer has a second job that is not temporary, and
it is on a day off from the main job, the commuting expenses are not
deductible.
Commuting
The cost of commuting from home to a taxpayer’s main job is
a nondeductible personal expense. This is true regardless of the distance
traveled to get to work. A taxpayer cannot convert a nondeductible commute into
a business expense by doing work during the commute.
Parking
If the trip is deductible, the parking is deductible. If the
trip is nondeductible commuting, the parking is nondeductible.
Advertising Display
Putting display material on a vehicle that advertises the
taxpayer’s business does not change the use of the vehicle from personal to
business. Business use is determined by the trip.
Car Pools
If a car pool is not for profit, the cost of using the car
is not deductible, and any reimbursements received are not treated as income.
If the arrangement is for profit, reimbursements from passengers are income,
and the cost of the commute is deductible.
Hauling Tools or Instruments
Hauling tools or instruments to work does not change the use
of the vehicle from personal to business. However, any additional costs, such
as trailer rental to haul the tools, are deductible.
Office in the Home
If an office in the home qualifies as a principal place of
business, daily transportation costs between home and another work location in
the same trade or business are deductible.
Standard Mileage Rate
Instead of deducting actual costs, a taxpayer can use the
standard mileage rate method to calculate the amount deductible for business
use of a vehicle. The deduction is calculated by multiplying the number of
business miles driven by the applicable standard mileage rate. The standard
mileage rate eliminates the need to keep track of actual costs. For 2014, the standard mileage rate for the cost of
operating your car for business use is 56.5 cents per mile.
Costs Included in the Standard Mileage Rate
The standard mileage rate can be used to replace the actual
cost of depreciation, lease payments, maintenance and repairs, gasoline, oil,
insurance, and vehicle registration fees.
Costs Not Included in the Standard Mileage Rate
In addition
to deducting the standard mileage rate, the business percentage of the
following costs is deductible.
• Interest
expense for a self-employed individual, (but not for an employee, even if the
vehicle is used 100% for business).
• Personal
property taxes.
• Parking
fees and tolls.
Choosing the Standard Mileage Rate
To use the standard mileage rate for a car that is owned by
the taxpayer, it must be used in the first year the car is available for
business. In later years, the taxpayer can choose between either the standard
mileage rate method or actual expenses. If you use the standard mileage rate,
you cannot deduct actual car expenses for that year.
Actual Expense Method
A taxpayer can figure a business auto expense deduction by
comparing the standard mileage rate with actual expenses and choosing the
larger amount in the first year the vehicle is used for business. If the actual
expense method is chosen in the first year, it must be used in all subsequent
years until the vehicle is no longer used for business.
Actual car expenses include the cost of depreciation, lease
payments, registration fees, licenses, gas, oil, insurance, repairs, tires,
garage rent, tolls, and parking fees. Sales tax paid on the purchase of a car
is added to the basis of the car and deducted through depreciation. Fines for
traffic violations are never deductible, even if incurred while driving for
business.
