- Your ability to write off vehicle expenses depends on the nature of your business and on the need to use your vehicle to conduct that business. For instance, a freelance consultant who is required to meet in person with her clients every week would be entitled to a tax deduction for vehicle expenses, while a consultant who conducts all his meetings via videoconference would not.
- If you plan to write off the business use of your vehicle, it is important to keep careful track of how many miles you drive in the course of your daily work. One of the easiest ways to keep your mileage data organized is with a mileage log. You can place that mileage log on the passenger seat of your vehicle, or in your glove box. Record the starting mileage on your vehicle before every trip, and record the ending mileage when you return or finish your business call. Write the total number of miles driven, along with the purpose of the trip and the date, in your mileage log. If you use an accounting software package for your business, transferring information from your mileage log to the program is beneficial as well.
- The Internal Revenue Service sets the mileage reimbursement rate each year, based on factors such as the cost of gas. For 2011, that rate is 51 cents per mile for business-related travel during the first six months of the year and 55.5 cents for travel from July 1 through December 31. The rate is subject to change in the future, and business owners should check the rates each year as part of their ongoing tax planning.
- Any time you take a business deduction, it is important to keep careful records. If you regularly use your vehicle in the course of your business, you need to document your mileage and keep track of your receipts. Keeping a separate bank account for your business can help as well, especially if you plan to take a deduction for the wear and tear on your vehicle instead of using the standard mileage deduction provided by the IRS.
Business Use
Mileage Log
Mileage Rates
Keeping Records
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