Self employed

@ErwRover 

If you use your personal vehicle for business, there are two ways to deduct your expenses. This is described in IRS publication 463, chapter 4.

https://www.irs.gov/pub/irs-pdf/p463.pdf

 

You can use the standard mileage method, which is about $.55 per mile, which includes all car related expenses — depreciation, maintenance, repairs, fuel, and insurance. You must keep a mileage diary that lists the date, business purpose of the trip, and miles driven.

 

Or you can use the actual expense method. You keep track of all of your vehicle expenses for the year – this includes interest (but not principle) on a car payment, fuel, repairs, maintenance, insurance, and depreciation or where in tear. You must also keep a mileage diary that list your business miles driven for the year and you must know the total miles driven for the year. You deduct a percentage of your actual expenses equal to the percentage of business miles driven.  For most cars, the standard mileage rate gives a better deduction with less paperwork than using the actual expense method.

 

If you buy a vehicle strictly for business use, you may be able to take the entire purchase price as a section 179 deduction in the year you place the vehicle in service. However, if the vehicle is not use 100% for business, you can run into trouble if audited.  If you later take the vehicle out of service – because you stop the business or because you sell or trade it in — you will owe depreciation recapture tax on the value of the vehicle at that time. This is because if you previously deducted the entire value, you have to pay tax on any income that results from the residual value when you sell it or stop using the vehicle for business and convert it to personal use.