Can I Claim Tax Deductions for Business Driving?
If you use your vehicle for a personal business, you might be able to claim certain write-offs on your tax return. Here’s a brief guide to whether or not you might qualify for car expense write-offs and what types of car expenses are deductible. Though, we recommend consulting with a tax professional when determining what you might or might not be able to deduct on your taxes.
Who can and can’t claim car expenses
According to the IRS, self-employed individuals and business owners can qualify for write-offs when it comes to vehicle-related costs. If you don’t fall into these two categories but use your car for work, it’s likely that you won’t qualify for a tax break. The majority of employees who use their car for work can’t claim an employee business expense deduction on Schedule A of their tax return, as the IRS confirms. Though, you might still be eligible to deduct unreimbursed employee travel expenses if you fall into one of the three following groups, as an Armed Forces reservist, a fee-basis state or local government official, or a qualified performing artist.
How to claim car expenses on your tax return
There are two ways to calculate car expenses: using the standard mileage rate or using the actual expenses. The former method involves figuring out mileage costs based on how many miles you used the car for business purposes and the IRS mileage rate for the tax year you’re filing taxes for. For instance, the 2021 tax year’s business mileage rate is 56 cents per mile, as Nerdwallet’s Tina Orem confirms. If you use this method, you can’t also try to claim reimbursement for car repairs, as the Firestone Complete Auto Care Team shares. The IRS automatically factors in car repair expenses when calculating the business mileage rate.
The latter method is based on totaling car-related fees you acquire during a tax year. Per the IRS, qualifying expenses you can list include gas, tires, repairs, tune-ups, lease payments, insurance, registration fees, and depreciation.
Whitney Russell resides in Dayton, though her spirit can be found beach-bumming in Puerto Rico (the land of her half-Puerto Rican heritage). When not crafting car-related content, she can be found chasing after the most amazing toddler in the world, watching her “beaver” of a husband build amazing woodworking projects, hanging out with two crazy dogs, and visiting family and friends. She also enjoys traveling, crafting, and binge-watching period dramas when time allows. See more articles by Whitney.