When deducting a vehicle bought for business use (paid in full, cash) can I list it as an asset rather than deduct the milage? If so, how should I categorize it?

You can claim deductible business auto/truck expenses in one of two ways.

• IRS Mileage Rate:  You can claim business miles times the IRS mileage rate. IRS mileage rates for business activities are $0.56/mile in 2014 and $.575/mile in 2015. You can add parking and tolls to the mileage rate.
• 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 payments if you lease it.)

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.)