Vehicle Mileage Deductions

Vehicle Expenses

If you claim a deduction for vehicle expenses for your business, you must provide certain information on the use of your car, truck, van or other vehicle.  This information will include the make, model and year of the vehicle, and the date placed in service.  It will also include the total number of miles driven for the year including and excluding the business mileage, as well as your verification of keeping and possessing accurate records of mileage and any vehicle expenses.  You will provide this information and report your expenses on your Schedule C or C-EZ, Schedule F, or Form 4562.  If you are both self-employed and an employee, you must keep separate records and report the expenses for your work as an employee only on a Form 2106 or 2106-EZ.

If you claim a deduction based on the standard mileage rate instead of your actual expenses, you are allowed to also deduct parking fees and tolls that apply to the business use of that vehicle. For example, when filing a Form 2106-EZ, you would complete Part I, line 1, calculating the standard mileage rate; then you would enter the amount of parking fees and tolls on line 2.  For 2010 beginning on January 1st, the standard mileage rates for the use of a vehicle will be 50 cents per mile for business miles driven, 16.5 cents per mile driven for medical or moving purposes, and 14 cents per mile driven in service of charitable organizations.

Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deductions for that vehicle. Also, the business standard mileage rate cannot be used for any vehicle used for hire, or for more than four vehicles used simultaneously.  If you claim a deduction based on actual car expenses using Form 2106, complete Part II, Section C and do not use a 2106-EZ.  In addition, unless you lease your car, you must complete Section D to show your depreciation deduction and any section 179 deduction and special depreciation allowance you claim.  If you are still using a car that is fully depreciated, continue to complete Section C and enter zero on the appropriate line since you have no depreciation deduction.

If you are an employer who reimburses employee business expenses, your treatment of this reimbursement on your employee’s Form W-2 depends in part on whether you have an accountable plan or not.  Reimbursements treated as paid under an accountable plan are not reported as pay.  Reimbursements treated as paid under non-accountable plans are reported as pay.  Employers need to tell employees what method of reimbursement is used and what records must be provided.  Publication 15 (Circular E) (Employer’s Tax Guide) has more information on employee pay.

Additional information can be found at in Publication 535 (Business Expenses), Publication 463 (Travel, Entertainment, Gift and Car Expenses).

<<Renting a Building to Your Business Travel Expenses>>