Mileage Reimbursement

• In 2010, the IRS standard mileage rate was 50 cents per mile. In general, if the vehicle is very efficient to operate, such as a high miles-per-gallon rating, using the mileage reimbursement method could result in a higher deduction. Expenses allowed in a addition to the mileage reimbursement are the cost of tolls and parking. Interest on a car loan plus the registration fees that are business expenses are also deductible. You cannot use the mileage reimbursement if the vehicle, at any time, was a depreciated expense for the business.
  
  

Actual Auto Expenses

• Even if your vehicle was not depreciated, you still have the option of using the actual expense. The actual auto expense method might provide a higher deduction than mileage reimbursement for a car that is costly to operate, such as requiring repairs or expensive tires. If the vehicle was driven for both personal and business use, only the percentage of the expenses attributable to business use, calculated as a percentage of total mileage, is deductible.
  
  

Determining Business Versus Personal Use

• If the vehicle is used for both business and personal use, careful record keeping is necessary. Write down the vehicle's mileage on January 1 and December 31 of each year. Record any daily mileage that the car is used for business purposes including driving to meet a customer. Mileage driven to a meeting with the company's accountant or lawyer, to the bank or to pick up office supplies also qualify. Divide the total number of miles driven for business by the total number of miles the car was driven all year to get the percentage of business use.
  
  

Record Keeping

• In addition to tracking mileage, the records should include actual vehicle expenses, allowing you to calculate the deduction using both mileage and actual expenses to determine which method provides you with the higher deduction. Typical allowable vehicle expenses include gas, tires, repairs, registration fees, insurance and lease payments. You should keep your receipts to back up your claim.