If you use your automobile for business then you are required to keep a log of your business miles if you want to be able to deduct the expenses incurred to operate the
Automobile Tax Deductions
vehicle. There are two separate methods allowed under the law for business use of an automobile. The first method is the standard mileage rate which is adjusted annually based on the overall operating expense studies done by the IRS which takes into consideration the costs of maintenance, repairs, depreciation, registration, gasoline prices, etc.
The standard mileage rate for operating a vehicle for business purposes in 2016 is 54 cents per business mile. When your vehicle use is reported on your tax return
you are required to report the total miles driven during the year, the total commuting miles and total business miles.
The second method of reporting business use of a vehicle is the actual method.
This method requires that the taxpayer not only maintain a log of total miles, business miles and commuting miles but also report the details of the actual cost of operating the vehicle. These costs include repairs, maintenance, gasoline, oil, registration, insurance, inspections, car washes, etc. These actual costs of operating expenses are allowed as an ordinary and necessary business expense deduction to the extent of the ratio of business miles driven during the tax year to the total miles driven during the year. This ratio is also used to determine the annual amount of cost recovery or depreciation allowed on the cost or adjusted basis of the vehicle placed in service. Normally, passenger vehicles used in business are referred to as luxury automobiles and have an annual cost recovery deduction which limits the amount of depreciation which is allowed.
For more important information on this topic and any other issues dealing with autos please contact me right away. I am here to service your tax needs.