Using Your Vehicle as a Tax Break
Many taxpayers drive for their job or business. How can you take advantage of your driving on your tax return?
- Track your mileage with a smartphone app or a mileage log. Note all the times that you drive for work.
- Each year the IRS puts out an updated mileage rate. For 2014, the business rate is 56 cents for each mile. (For 2015 the rate will be 57 1/2 cents.)
- Track what you pay for your car, truck or van: include your gas, oil, tires, repairs, lease payments, vehicle insurance, vehicle registration fees and driver's license fees.
- The value of the vehicle that you own goes down over time. That depreciation counts as well. But the IRS has a dollar limit for how much depreciation you can deduct, depending on the kind of vehicle you own.
- Parking fees and tolls can be deducted whether you use actual expenses or the standard mileage deduction.
- Compare your allowable expenses against your allowable mileage.
- If you own your vehicle, you can deduct mileage if you used the mileage deduction in the first year that you used the car for business. For future years, you can go back and forth between the expenses and the mileage.
- If you lease your vehicle and you deduct mileage, you have to use the mileage for each year that you use the vehicle for business.
- If you work from home, you can deduct the expenses or mileage for business trips.