How to Correctly Deduct Car and Truck Expense

When you use your car or truck for business, generally the expenses associated with that are deductible as business expenses.  You can deduct the auto expenses for business when you are traveling from one work location to another, visiting customers, attending business meetings away from your regular workplace, or getting from home to a temporary workplace.  You should remember that auto expenses related to travel between your home and your regular place of work are considered commuting expenses and are not deductible.

There are two options for deducting auto expense on your tax return.  You can choose to use either the standard mileage rate or actual expenses. 

The standard mileage rate can be used to figure the auto deduction if the car or truck is owned or leased.  When your auto is leased and you use the standard mileage rate, it must be used for the entire lease period.  The standard mileage rate is adjusted annually by the Internal Revenue Service.  For 2009 the rate is 55 cents per mile.  There are a few cases when you are not allowed to use the standard mileage rate and that is when you use the car for hire, use more than five cars at a time, claim depreciation on the auto, or are a rural mail carrier.

The actual expense method includes deducting expenses for depreciation, gas, insurance, repairs, oil changes, registration, etc.   In the case of the actual expense method, if your business use is less than 100% you must allocate the expenses between business and personal use. 

No matter which method you choose it is important to keep good records of your expenses and your miles driven both personal and business.  It is important to keep a mileage log and the receipts for gas, repairs, etc. If you have questions on whether or not an auto expenses is deductible or about which method is better for your situation then please contact your tax advisor.

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Seattle CPAAbout Seattle CPA
Seattle CPA+John Huddleston has written extensively on tax related subjects of interest to small business owners. Since 2002, he has owned his own small business, Huddleston Tax CPAs. He is a graduate of Washington State University and the University of Washington School of Law.

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