You can claim deductible business auto expenses in one of two ways.
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IRS Mileage Rate: You can claim business miles times the IRS mileage rate. IRS mileage rates for business activities are $.555/mile.
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Actual Cost:You can claim your actual costs including depreciation times the percentage that you use your car for business. Actual costs would include gas, oil, insurance, repairs, etc. Payments on a note would not be deductible. The cost of the vehicle would be deducted through depreciation instead (or lease deducting lease payments if you lease it.)
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Where to Deduct
If you are an employee, they are a miscellaneous itemized deduction. Miscellaneous itemized deductions are only available if you qualify to itemize and only to the extent that they exceed 2% of your Adjusted Gross Income. Example: If your Adjusted Gross Income is $50,000, only miscellaneous itemized deductions over $1,000 are deductible. Because of this, many items deductible as miscellaneous itemized deductions have no tax value because the taxpayer doesn't itemize, or because they are lost in the 2% of adjusted gross income limitation.
If you are self-employed, these expenses would be business expenses on Schedule C.
(No matter which method you use, your auto expenses must be reduced by any reimbursement not otherwise reported as income.)
