If you use your vehicle for work purposes, you may be able to deduct vehicle expenses on your tax return. You can choose one of two methods:
Standard Mileage Rate
The IRS sets a standard mileage rate for the cost of operating your vehicle, which you would multiply by the total business miles driven during the tax period. In order to use the standard mileage rate, you must choose the method in the first year your vehicle is used for business. In future tax periods, you can choose to switch to actual expenses. For a car you lease, you must use the standard mileage rate method for the entire lease period (including renewals) if you choose the standard mileage rate.
The standard rates for 2017 mileage are:
- Business 53.5 cents
- Charitable 14 cents
- Medical 17 cents
- Moving 17 cents
To use the standard mileage rate, you must own or lease the car. Though, in certain situations, you cannot use the standard mileage method if you:
- you operate a fleet of five or more vehicles that are used at the same time,
- you used a depreciation method other than straight-line,
- you took a Section 179 deduction or special depreciation allowance on the car,
- you must not have claimed actual expenses after 1997 for a car you lease, and
- you are a rural mail carrier and receive qualified reimbursements.
These deductible expenses include the following:
- Repairs and Tires
- Gas and Oil
- Licenses and Registration Fees
- Lease Payments
You must only deduct the actual expenses related to the business use of the vehicle. If you used your vehicle for 50% business and 50% personal use, then you would deduct 50% of the actual vehicle expenses.
If you have the option to choose which method you use, you should calculate both methods and select the one with the greatest benefit.