Self-employed people can deduct vehicle costs two ways: add up all expenses (gas, insurance, maintenance) and apply your business-use percentage, or multiply business miles by the IRS rate ($0.56 per mile). Either way, track total and business mileage to calculate what percentage counts.
Can I deduct my car for taxes? And if I can deduct it, how do I actually do that? The IRS has 2 ways in which you are able to write off vehicle use in your business. Either actual expenses. Actual expenses will include the gas, if I get new tires, windshield wipers, oil changes, car washes, insurance, vehicle registration. If I have a car loan, the interest on the car loan. All of that would be actual expenses. Or the other option they give you is just a simple calculation of a mileage deduction. You take the business miles you drove and multiply that by the IRS mileage rate. They change the rate every year, so look it up. But let's say it's 56 cents a mile and I drove 10,000 miles. I'd take 10,000 times it by 56 cents, my write-off would be $5,600. Now when I say both ways, sometimes clients will come and say, well, I don't want to track my own mileage. That sounds like a pain in the butt. So I'm going to take my actual expenses. Unfortunately, the IRS allows you to take the business use percentage of your actual expenses. Just like they let you claim only business miles and not all your miles, they only let you take actual expenses to the extent of the business use percentage. Well, how do you calculate business use percentage? You track mileage. It's your business miles divided by your total miles. So under either scenario, I have to track my miles if I want to write off my vehicle on my tax return. But what happens, let's say I want to take my mileage deduction on the tax return and not my actual expenses? You still want to pay for your vehicle expenses out of your business account. Okay, so here are 2 things. Regardless of what option you choose, if you want to take actual expenses or mileage, Pay for your vehicle expenses out of your business and track your miles. There are some very fun bonus depreciation methods, which basically is a fancy way to say you potentially could write off the total cost of your car in one year. Again, if there's things like that where you have further questions, please use us as a resource. Remember, the IRS sucks.
