Deducting Business Car

Today TaxMama hears from Michael in the TaxQuips Forum who wants clarification. “I drive a lot. Is there a maximum dollar amount I may deduct for my vehicle expenses?”

Hi Michael,

No, there is no maximum amount you may deduct. If you can prove you drove the miles for business – the deduction is yours.

For instance, one of my clients was a field reporter for KABC radio. It was his job to be on the spot wherever there was news. His mileage was 50,000 + each year.

To better understand how the expenses and reimbursements work, take a look at Form 2106.

You will enter your gasoline reimbursement on line 7A.

You will fill out the second page, Part II with your vehicle expense and mileage details.

You MUST track the total miles and business miles in order to fill out this form. It makes no difference whether you use mileage or actual expenses.

In the FIRST year, you make the choice of actual expenses or mileage. After that, it’s not that easy to switch. There are some instances where you may. But make your decision in the beginning for the long run.

Yes, it can get complicated. And the depreciation deductions drop dramatically after the first or second years. So it really helps to have a thorough understanding of depreciation rules.

I know it seems as if I’m repeating myself. But when it comes to stuff like this, I really wish you sit down with an experienced tax pro. Let them run some projections for you based on your job expectations.

They may have some other suggestions for things you can do this year to increase your deductions.

Also, there are times when we can encourage employers to provide certain letters or to establish company policies in writing, to safeguard your deductions – and those of people in similar positions.

And remember, you can find answers to all kinds of questions about auto expenses, and other tax issues, free. Where? Where else? At www.TaxMama.com.

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