Auto Deduction Rules

Defined

You are allowed a deduction for reasonable ordinary and necessary business expenses relating to use of your vehicles.

Includes

Expenses for business related mileage to meet with customers or prospective clients, pick up and deliver, and other business related activities.

Excludes

Commuting mileage from your home to your first business stop and from your last business stop to home (unless your office is at home).

Rules

You may claim your auto deduction using either the actual expense method or the mileage rate method. If you use actual expenses, you can deduct the (business use percentage of) vehicle depreciation or lease payment, interest on the loan, gas, maintenance, repair and insurance. If you use the mileage method, you multiply the number of business miles by the current mileage rate.

Limit on Deduction

• The 2016 mileage rate is 54 cents per business mile.
• The 2017 mileage rare is 53.5 cents per business mile.
• The 2018 mileage rate is 54.5 cents per business mile.

Tax Records

You must keep a daily written log of where you went, the business purpose and number of miles driven. You may use the enclosed Mileage Records for that purpose. If you forget or find it hard to do on a daily or weekly basis, keep track of where you traveled in your daytimer so you can fill in the blanks before the end of the year.

Tax Strategy

Combine business and personal trips to write off mileage that would otherwise be personal. If you drive an expensive vehicle and drive few miles, the actual expense method may be more advantageous. If you drive a less expensive vehicle and travel a lot of business miles, the mileage method will generally create a larger deduction.

Beware

This is one of the first places the IRS will look in an audit. Be sure you have good records or the deduction will be disallowed. Mileage records are required by the IRS regardless of whether you use the actual expense or mileage method.