If you want to take a deduction for the
business use of your vehicle, you must decide whether to deduct your actual
expenses or use the standard mileage rate. The standard mileage is easier to
calculate and, if the IRS questions the deduction, only requires that you
provide a written, detailed log of the miles driven. When deducting actual
expenses, gathering the paperwork to substantiate the expenses requires more
effort, but deducting the actual expenses on the return may be more beneficial
in certain cases. Your Jackson Hewitt tax preparer can help you determine which
method is most advantageous for you.
Using the Actual Expenses
Certain vehicle-related amounts you spend can be used to determine
your actual expenses. Vehicle expenses
- Registration and
license plate fees
- Parking fees and tolls
- Lease payments
- Repairs and maintenance (including
- Gasoline and oil
- Car washes
depreciation deduction allowed may be limited due to the IRS passenger
Using the Standard Mileage Rate Method
elect to use the standard mileage deduction, you may deduct 56 cents for
business purposes and job searching (in a related field). If you move to a new
home because of a job change, the mileage rate while moving is 23.5 cents per
mile (these miles are deducted on Form 3903, Moving Expenses, if you meet the
moving deduction requirements).
Generally, you can use the standard
mileage rate if you are not reimbursed and if your reimbursement is less than
the amount calculated using the standard mileage rate.
You must choose the
standard mileage rate or actual expense method the first year you use the vehicle
for business purposes. If you choose the standard mileage rate, you can switch
to the actual expenses method in a later year. If you use the standard mileage
rate for the tax year, you cannot deduct any of your actual vehicle expenses for
that year, other than parking, tolls, car rental fees if not reimbursed by your
employer, and the business portion of any personal property taxes (if based on
the vehicle's value). You must elect to use the standard mileage method the
first year the vehicle is available for use in your business. In later years,
you can choose to switch methods from standard mileage rate to actual expenses
but not from actual expenses to standard mileage rate. If you switch to actual
expenses method in a later year, but before your vehicle is fully depreciated,
you will have to estimate the remaining useful life of the vehicle and use
straight-line depreciation. If you use the standard mileage rate for he tax
year, you can't deduct any of your actual vehicle expenses for that year, other
than parking, tolls, car rental fees, and the business portion of any personal
property taxes. If you use the standard mileage rate method for a vehicle you
lease, you must use it for the entire lease period.The non-business portion of
personal property taxes are deducted on Schedule A, Itemized
You cannot claim the standard mileage rate in the
- You use five or more vehicles for business at
the same time.
- Your employer provides you with a vehicle. In this
instance, you might be able to deduct the actual expenses of operating that
vehicle for business purposes. The amount you can deduct depends on the amount
that your employer included in your income and the business and personal miles
you drove during the year.
- You use the vehicle for hire, (such as a
- You claimed depreciation under any method other than
straight-line, a special depreciation allowance, or any section 179 deduction in
a prior year.
You can deduct any additional costs you had for
hauling tools or instruments (such as the rental of a trailer you tow with your
vehicle). You cannot deduct fines you paid for traffic violations, any amount
that is eligible for reimbursement from your employer or, if you are an
employee, interest paid on a vehicle loan (this interest is treated as personal
If the vehicle was used only partly for business, expenses must
be allocated between personal and business use. You will usually use a
percentage based on miles driven for business purposes during the year over
total number of miles driven during the year.
Not all commuting miles are
treated the same for tax purposes and they may not be considered to be for
business purposes. Your costs of driving a vehicle between your home and your
main or regular place of work are personal commuting expenses and are not
deductible, no matter how far your home is from your regular place of work and
regardless whether you worked during the commuting trip. For example, if you
make business calls on your cell phone while driving or you have a business
associate riding with you and you discuss business on the way to work, this does
not change the regular commute from a personal expense to a business expense.
Additionally, if you have a business advertisement on your car or if you haul
tools or instruments in your car while commuting to and from work, the regular
commute is still considered a personal expense.
Although regular commuting
to and from work is not deductible, commuting miles may count as business use if
your home is your office, if you are working out of a temporary location, or if
you work in two or more different places during the day.
- If you have a qualifying home office for your business, the
round-trips between your office and your client's place of business.
have no regular office and you do not have an office in your home. In this case,
the location of your first business contact is considered your office.
Transportation expenses between your home and this first contact are
nondeductible commuting expenses. Transportation expenses between your last
business contact and your home are also nondeductible commuting expenses.
Although you cannot deduct the costs of these trips, you can deduct the costs of
going from one client or customer to another.
- You regularly work in an
office in the city where you live. Your employer sends you to a one-week
training session at a different office in the same city. You travel directly
from your home to the training location and return each day. You can deduct the
cost of your daily round-trip transportation between your home and the training
- You do not have a regular place of work but you ordinarily
work in the metropolitan area where you live. You can deduct your daily
transportation costs between your home and a temporary work site if it is
outside that metropolitan area.
- You work at two places in one day.
Whether or not you work for the same employer, you can deduct your expense of
getting from one workplace to the other. However, if for some personal reason
you do not go directly from one location to the other, you cannot deduct more
than the amount it would have cost to go directly from the first location to the
Fees you pay to park a vehicle at work or tolls paid to get
to work are nondeductible commuting expenses. However, business-related parking
fees and tolls are deductible (for example, when visiting a customer, traveling
to a temporary work location, attending a seminar, or when looking for a job in
a related field) whether you take the standard mileage method or actual expenses
Contact your neighborhood Jackson Hewitt office for more
information or assistance. Use our Office
Locator or call 1-800-234-1040 to find the Jackson Hewitt location most
convenient to you.