If you use your car only for business purposes, you may deduct its entire cost of ownership and operation (subject to limits discussed later). However, if you use the car for both business and personal purposes, you may deduct only the cost of its business use.
You can generally figure the amount of your deductible car expense by using one of two methods: the standard mileage rate method or the actual expense method. If you qualify to use both methods, you may want to figure your deduction both ways before choosing a method to see which one gives you a larger deduction. [from the IRS website]
Do you know you could deduct some actual expenses even though you choose the standard mileage rate method for your car?
Figuring deductible car expenses
You can always use two methods to report your car expenses:
- Standard mileage rate
- Actual car expenses
The cost of using your car as an employee will no longer be allowed to be claimed as an unreimbursed itemized deduction, and this rule applies to tax years from 2018 to 2025.
Standard Mileage Rate
Choosing this method means you don’t need to record depreciation, lease payments, maintenance and repairs, and so on, but only mileages for business trips, dates, and the destination. However, you may not be aware that interest payments, personal property taxes, parking fees, and tolls are still deductible under this method.
Interest and Personal Property Taxes
To claim these two, you need to be self-employed and use the car in your business, then you can deduct that part of the interest expense for the business use of it. Both of these can be deducted on Schedule C, but only personal property tax can be deducted on Schedule F too. The personal use part of interest can’t be deducted anywhere, but the remainder of personal property tax can be itemized on Schedule A.
Parking Fees and Tolls
You can deduct any parking fees and tolls total amount if they are business-related, except those should be classified as commuting expenses, such as parking fees that happen at your workplace.
Actual Car Expenses
Choosing this method means you can deduct actual expenses that you can’t deduct under the standard mileage rate. Also, if you have fully depreciated a car that you still use in your business, you can keep claiming your other actual car expense.
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