I use my vehicle for my business. Am I allowed to take a deduction for that?

Yes. 

There are several requirements; but one, non-negotiable. You must have a written record of the business use of each vehicle during the year. That record must include enough information to prove how many miles you drove for business, when you drove and the business purpose of each trip. It's best if the entries are prepared at the same time you use your vehicle for business (not after the fact). The actual form of the record can vary although the best proof is a daily log.  Lot's of details are good - there's no such thing as too much detail. Caution: Taxpayers have been denied this deduction because it doesn't look believable.  What this means is, if it looks like you made up a log after the fact, your deduction might be denied.

Calculating the deduction

The amount of your deduction can be computed one of 2 ways.

Standard mileage rate.

The number of miles you drove for business is multiplied by the standard mileage rate. It's that simple - as long as you have a written record. If you have a vehicle loan, you can add a percentage of the interest (see below). You can find the current and historical rates here.

Actual expenses.

 

First, determine the business use percentage by dividing the number of miles you drove for business by the total miles each vehicle was driven during the year (think odometer readings at the beginning and end of the year). Then, multiply the total expenses you incurred to own and operate each vehicle by the business use percentage. The result is your deduction. Actual expense include:

  • Fuel (all for the year)

  • Maintenance

  • Repairs

  • Tires

  • Insurance

  • Interest (but not the principal portion of vehicle loan payments)

Documentation.

 

When you use the actual expense method, you must have proof of the money you spent on all vehicle expenses. Note: Receipts for fuel purchases only prove how much you spent, they do not prove the business mileage.