Taking the IRS for a Ride

To take a business expense deduction for the use of your car, you must determine what percentage of the vehicle was used for business. No deduction is allowed for strictly personal use, such as commuting.

Deductible car expenses can include the cost of

  • traveling from one workplace to another,
  • making business trips to visit customers or attend business meetings away from your regular workplace, and
  • traveling to temporary workplaces.

To claim the deduction, keep complete and accurate mileage records. Two methods are available for claiming business car expenses:

Actual Expenses: Add your annual car operating expenses, including gas, oil, tires, repairs, license fees, lease payments, registration fees, garage rental, insurance and depreciation. Multiply the car operating expenses by the percentage of business usage to arrive at your deductible expenses. Business-related parking and road tolls are fully deductible expenses that do not have to be reduced by the percentage of business usage.

Standard Mileage Rate: The 2010 standard mileage rates for the use of a car (including vans, pickups or panel trucks) are on IRS.gov, search: standard mileage rate.