Car Care ArticlesCan You Write-off Your Car as a Tax Deduction? Maybe...

Navigation

Can You Write-off Your Car as a Tax Deduction? Maybe...

News

Home

Article Index Page

Auto Parts Advice

Body Shop Is This The Right Time To Sell One

Auto Loans Are You Over Paying

CAR ACCIDENT FACTS

7 Tips to the Best Moving Truck Rental Experience

Auto loans brings your dream automobile within your reach

A Guide to Getting the Best Vehicle Shipping Quote

Add performance with clean air cleaners

Car Dealer Scams What To Look For

5 Tips to Getting a Truck Rental

Auto insurance reduce costs but maintain protection

7 Guidelines For Used Car Prices

Camshaft A Go For Gold

Are you in search of the best sourced help regarding car parts

Brake Dust Shields Protect Your Wheels

After the most informative assistance concerning car repair

Auto Transport Tips For The First Timer

A Car Resale Value A Car Buying Guide

5 Tips On Making Your Car More Fuel Efficient

Auto Parts Inner Offers Preventive Car Maintenance Tips and Quality Replacement Parts for Ford BMW Toyota Honda Chevrolet and More

You've heard it a hundred times: That shiny new car your buddy just bought? It doesn't really cost him anything. He writes off the car as a tax deduction.



Your first thought is usually, "That can't be right." Your second thought is, 'I got to figure out how to enjoy that loophole."



But what does the law say? And what are the rules for writing off vehicles? It turns out that you can write off the cost of buying and using a car if you're self-employed and use your vehicle in your business. Specifically, you can probably deduct the business portion of your vehicle expenses on your business tax return.



But this deduction is trickier than most people realize. Here's the first big thing that goofs many people up. You need substantiation to prove your business use. Ideally, in fact, the Internal Revenue Service wants you to keep a log of your business miles, your commuting miles, and your personal miles.

With this information, you can then either deduct an amount equal to the business miles times a standard per-mile rate of roughly $.35 or $.40 a mile (depending on the year)... or you can deduct the percentage of your vehicle expenses equal to the percentage that your business miles represent.



Note that only your business miles--and not your commuting miles or personal miles are deductible.



For example, if your business use equals 5,000 miles, personal use equals 3000, and commuting equals 2000 miles, your total miles for the year equal 10,000. Business miles as a percentage of total miles equal 50% because 5,000 divided by 10,000 equals .5 or 50%.



In this example, you could therefore deduct 50% of your fuel, 50% of your insurance, 50% of your maintenance and repairs, 50% of the car loan interest, 50% of the depreciation, and so on, as a business deduction. This means you can't ever deduct all the costs of owning and running vehicle--only the business use of a vehicle.



If you don't have exact records about your business use, you can sometimes use good sampling. For example, if you keep a good appointment calendar of your business activities, one popular tax reference suggests that you can look at the total business, personal and commuting miles driven during one week each month. Then, you can average this data to get good weekly estimates of your business, personal, and commuting miles. Finally, you can multiple these weekly estimates by 52 (the number of weeks in a year) to get reasonable estimates of your business, personal and commuting miles.



But before you go out and buy a new luxury auto, you need to know there's another complication. Congress limits in most cases the amount of depreciation or lease rental that you can include in your vehicle expense calculations. The rules are a bit tricky, but essentially, for purposes of vehicle depreciation and lease payments, you only get to look at the first $17,000 (roughly) of vehicle cost. In other words, if you buy a $60,000 vehicle and your friend buys a $15,000 vehicle, you may both have the same business depreciation expense--even though your vehicle costs four times what your friend's does.



One other related point: You may have heard about the sport utility vehicle loophole. This SUV loophole really does exist. Specifically, the luxury auto limits mentioned above don't apply to sport utility vehicles that weigh more than 6,000 lbs. Note that Congress partially closed that loophole in 2004, however, by saying that a special, super-accelerated form of depreciation called Sec. 179 depreciation can't be used to write off all of the cost of an expensive SUV in the year the vehicle is purchased.



About the author:

Redmond WA CPA & author Stephen L. Nelson is an adjunct tax professor for Golden Gate University's graduate tax school.

Written by: Stephen L. Nelson, CPA

Article RSS Feeds

AutoCare RSS Feed Button AutoCare XML Feed Button

 

Article Snippets

5 Tips to Buying BMW Auto Parts
If you are looking for parts for your BMW M3, X5 or Z4, you want the best. Whether you are needing to replace the brakes, hoses, lights or even the...

Buying A Used Car - The Wise Way!
I have always purchased my cars used. And each time, I got a great deal. Don't think I counted on luck, though - no siree. There are a few "musts"...

Can you really get a free car?
Can you really get a free car? You may have heard rumours that you can get a free car. Well, this is not exactly true. As the old adage goes, you...

Buying Do-It-Yourself Automotive Equipment
Buying DIY Automotive Equipment Everyone is getting into do-it-yourself (DIY) projects these days, and that even includes fixing your car....

Buying Tips For Used Cars
Resorting to buying used cars is not a bad idea. For some people who cannot afford to buy brand new cars, second hand cars offer valuable...

10 Tips for Using Less Gas and Saving More Money
The hurricane that has devastated so many lives has created a huge spike in gasoline prices around the country, even in areas that are not...

Add-on Accessories To Enhance Your Ride
There are many add-on devices and gizmos for cars that can provide features to make your ride better. There are accessories that will give you music...

Brake Dust Shields Protect Your Wheels
The quickest way to ruin the wheels on your car is to let brake dust gather unimpeded. Sure, you can clean the dust off on a daily basis, but who has...

Auto Insurance Guide- Get your Auto Insurance Policy
Auto insurance provides complete protection against losses happened as a result of vehicle accidents. Normally it includes car insurance and motor...

Buying and Selling USed Cars For A Profit
Buy and Sell Used Cars for Profit Here is a great home based business opportunity- the buying and selling of used cars. It's easy to find...

This is a third party article - we make no claims or guarantees regarding the accuracy of the information presented