Claiming car expenses

Claiming Car Expenses

Condensed and summarized by Fernando Olmedo, focalerta@yahoo.es

• You can claim a car trip as a business expense if the primary purpose of the trip is business

• You must keep adequate records to prove that you made a business trip

• Receipt
• Mileage log
• Cancelled check
• Debit/credit card statement
• Written record
• Calendar notations
• Photograph

•  Two methods to claim car expenses
• Standard Mileage Method
• Actual Expenses Method

•  Standard Mileage Method
• 51 cents per mile: January - June 2011
• 55.5 cents per mile July - December 2011
• Can also claim parking, tolls, and business percent of car loan interest and personal property tax

•  Actual Expenses Method
• Can claim business percent of all expenses associated with the car, including gas, oil, repairs, insurance, depreciation, car loan interest, etc.
• Business percent is calculated by dividing the number of business miles by the total number of miles
• 2,000 business miles divided by 10,000 total miles = 20%

Other questions: “Can I deduct the car loan payment?”

- No. If you use the actual expenses method you can depreciate your vehicle. This will allow you to deduct over time the cost of the vehicle. You can always deduct the business portion of any car loan interest you pay, whether you use the standard mileage method or the actual expenses method.

“If I didn’t claim mileage in 2011 can I claim these miles in 2012?”

 
- No. The only way to claim these expenses is to amend your 2011 tax return using IRS Form 1040X.

“Can I deduct 100% of the miles I drove to supermarkets if I bought things for the daycare and my family?”
 

- Maybe. You can only deduct trips where the “primary” purpose of the trip was for your business. Primary purpose means more than 50% of the reason you drove was for your business. If you spend more money on business food than personal food, you could count this trip. However, never deduct 100% of trips to grocery stores because the IRS will say you must have some personal trips. Count maybe 60%, 70%+ of your trips to grocery stores, but never 100%.

“If I use the standard mileage rate can I also deduct vehicle insurance that was purchased because of my business?”
 

- No. You can only deduct vehicle insurance if you use the actual expenses method for claiming car expenses.

“I have a leased vehicle, can I use the standard mileage rate?”
- Yes.

“Can I go back and forth between using the standard mileage method and the actual vehicle expenses method?”
 

- If in the first year you use your car for your business you choose the standard mileage method, you can switch over to the actual expenses method in later years. If in the first year you use your car for your business you choose the actual expenses method, you cannot switch over to the standard mileage method in later years.

“Do I need to keep odometer readings when claiming car expenses?”

-No.