Yeend, Castaneda & Flynn, LLP

Your automobile may provide you with several tax deductions that may lower your income tax. As with all deductions, it is important to maintain accurate records of your expenses.

 

Businesses

You cannot deduct commuting mileage ­that is, mileage from your home to your regular job.

If you use your car for personal and business purposes, you will have to divide the expenses between the personal and business portion.

If you are self-employed and maintain an eligible office in your home, you can deduct the mileage to and from your client or customer's place of business, as well as between jobs.

As an employee, you can deduct mileage between jobs or to a temporary assignment. A temporary work assignment is defined as lasting a few days or weeks, but less than a year.

If you do not have a regular place of business, you can only deduct your transportation expenses to a temporary location outside your general area of employment.

 

If you are an Armed Forces Reservist, you can generally deduct your transportation expenses to attend meetings.

The meetings must take place on a day that you normally work.

You cannot deduct expenses for transportation on a day you normally do not work.

If you travel and stay overnight to attend a Guard or Reserve meeting, you can deduct your travel expenses.

 

Expenses

There are two ways to calculate your auto deductions - the standard mileage rate or actual expenses. These methods are available whether you own or lease your vehicle.

 

Standard Mileage Rate Method:

For most taxpayers, the standard mileage rate is easier to use.

Beginning October 1, 2002 , the standard mileage rate is 36 cents per mile.

To calculate, multiply the rate by your business miles to figure your deduction.

In addition to the standard mileage rate, you can also deduct the cost of business-related parking fees and tolls.

 

Actual Expense Method:

Actual expenses such as the cost of gas, oil, insurance, repairs, maintenance, tires, washing,  licenses, and depreciation or lease payments are eligible.

Cost of business-related parking fees and tolls are includable.

If you are self-employed, the business percentage of the interest on your car loan is also deductible.

This method requires very detailed record keeping and the saving of all receipts.

If you use your car for business purposes, you may use either the standard mileage rate or actual car expenses.

Example: If you use your car 50% for business use and 50% for personal use, you will only be able to deduct 50% of the cost of your eligible expenses.

 

Record Keeping

You will need to keep accurate records of the miles incurred for business purposes, dates of business use, destination, and business purpose.

You will need odometer readings at the beginning and end of the year to determine the total miles for the year for all uses.

The above can be figured by keeping a record in a notebook in the glove box of your vehicle or by purchasing and using a logbook.

The important aspect is to make sure you maintain accurate records. The IRS may disallow a deduction for mileage if you are unable to substantiate your deduction.

If you use the standard mileage rate, you cannot use your actual expenses.

 

Medical Mileage

You can deduct 12 cents per mile in 2003 if you use your car to obtain medical care.

Medical care can be to the doctor's office, dentist's office, or to the hospital to obtain medical treatment

Parking fees and tolls associated with medical treatment are also deductible.

If you choose to use actual car expenses, you can only deduct the cost of gas and oil, not depreciation, repairs, etc. These expenses are added to your other medical expenses and deducted on Schedule A subject to the normal limitations (7.5% of adjusted gross income).

 

Charitable Mileage

You can deduct 14 cents per mile in 2003 if you use your car for charitable purposes. You can also deduct parking fees and tolls.

If you choose to use actual expenses, you are again limited to unreimbursed expenses for gas and oil.

You cannot deduct mileage or expenses for charitable purposes if a significant part of the travel is for personal pleasure.

 

Moving Mileage

If you move in 2003 and qualify for the moving expense deduction, you are allowed either the actual expenses for the move itself or 12 cents per mile for the actual relocation.

 

#854 — © Copyright 2003  
National Association of Tax Professionals (NATP)
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