How Do I Deduct a Car or Vehicle?

How Do I Deduct a Car or Vehicle?

One of two types of deductions can be taken when it comes to vehicles, depending on the nature of the vehicle's use. Our team can help you identify which method to use for your business.

Actual Expenses

As the name implies, this method involves claiming actual expenses associated with the use and maintenance of a business vehicle. Under this method, business owners may claim the business use portion of expenses, such as:
  1. Gasoline
  2. Registration & Insurance
  3. Repairs
  4. Maintenance
  5. Depreciation
This method benefits those with dedicated business vehicles that are costly to fuel and/or maintain, and even more so if the vehicle has a large value for depreciation. In order to take this method, the vehicle must be used more than 50% for business and exist as an asset on the business balance sheet, which our team can help with.

Standard Mileage Method

The other option available to business owners is the standard mileage method, which provides a simple flat rate "per mile" deduction for business miles driven in the tax year. The amount per mile changes each year. In 2023, the amount per mile is 65.5 cents.

Though the deduction involves only simple math come tax time, this method does require consistent and detailed record-keeping in the form of a mileage log to determine the deduction amount. All things considered, this method is a great choice if keeping track of individual purchases is too cumbersome, if the vehicle is used primarily (more than 50%) for personal use, or if the vehicle is relatively efficient and does not require regular costly maintenance.

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