H&R Block Presents – USING YOUR VEHICLE FOR BUSINESS
If you use your vehicle for business purposes, you may qualify for a deduction on your income tax return. The deduction is for self-employed taxpayers only. Most employees (taxpayers who are paid on a W-2) are not allowed to claim employment related expenses.
To claim an expense deduction for vehicles used in business, recordkeeping is crucial. You must keep detailed records of the business trips. For each business-related trip your log should contain the date, destination, business purpose, and number of miles. To keep your mileage log, you can use a manual paper log such as a notebook or daily planner calendar, computer spreadsheet, or one of many apps that are available. You must also record your odometer reading at the beginning and end of the tax year. If you use more than one vehicle for your business, you should keep a log for each vehicle.
Your vehicle expense can be deducted in one of two ways. Both ways require the mileage log and total miles driven for the year. The STANDARD MILEAGE RATE allows you to deduct a federal rate per mile for each eligible business mile driven in the year. The federal rate varies but for 2021 the rate is 56 cents per mile.
If you choose not to use the standard mileage rate, you can use your ACTUAL vehicle expenses such as fuel, insurance, repairs, license, parking, tolls, lease payments, etc. Usually, you can also take a deduction for the cost of your vehicle. You must keep receipts for actual expenses for the entire year to prove your deduction. Your tax deduction will be the total expenses for the vehicle for the year multiplied by the percentage of business use (determined from your mileage log).
Trips that begin at your home are considered commuting expenses and are not deductible unless you have a qualified office in home expense. However, miles driven from your first business related stop to your other stops during the day are deductible miles.
Vehicle expense deductions are frequently overlooked, but they can be a very helpful tax deduction. It is important that you maintain proper records to benefit from the deduction.
Stay tuned for next week’s tax tip for more information on qualified office in home expenses and how an office in home relates to your vehicle expenses.
If you need information about vehicle deductions for your business, please call your local H&R Block office. In Manchester TN call 931-728-9462. H&R Block Has Your Back!
