Auto Expenses

If you use your car for business purposes, you may be able to deduct car expenses. You generally can use one of two methods to figure your expenses: Actual Expenses or the Standard Mileage Rate.

Actual Expenses

Deductible Items — If you choose to deduct actual expenses you can deduct the cost of the following items:

  • Depreciation
  • Lease Fees
  • Rental fees
  • Garage rent
  • Licenses
  • Repairs
  • Gas
  • Oil
  • Tires
  • Insurance
  • Parking fees
  • Tolls

Business and Personal Use — If you use your car for both business and personal purposes, you must divide your expenses between business and personal use.

Example: You are a contractor and drive your car 20,000 miles during the year: 12,000 miles for business use and 8,000 miles for personal use. You can claim only 60% (12,000 / 20,000) of the cost of operating your car as a business expense.

Standard Mileage Rate

Instead of figuring actual expenses, you may be able to use the standard mileage rate to figure the deductible cost of operating your car, van, pickup, or panel truck for business purposes. You can use the standard mileage rate only for a car that you own. The rates are adjusted periodically for inflation.

If you choose to take the standard mileage rate, you cannot deduct actual operating expenses. These include depreciation, maintenance and repairs, gasoline (including gasoline taxes), oil, insurance, and vehicle registration fees.

Mileage Rates (cents per mile)

Year Business Medical Charitable
2015 57.5 23 14
2016 54.0 19 14
2017 53.5 17 14
2018 54.5 18 14

Employer Provided Vehicles

In general, personal use of a company owned vehicle by an employee must be included in the employee’s wages or reimbursed by the employee.  Personal use is defined as any use of the vehicle other than use in the trade or business, such as commuting. Depending on the fair market value of the vehicle, you can use the cents-per-mile rule, multiplying the standard mileage rate times the total miles driven by the employee for personal use. Different rules apply if the vehicle exceeds the maximum automobile value published by the IRS when you first make it available to any employee.

Personal Use of Vehicles by Control Employees

In general, an employee shareholder/owner/partner who drive vehicle(s) owned and operated by their companies must report personal use of the automobile as wages on their W-2. The lease value rule is used to determine the value of the automobile provided to the control employee. The annual lease value calculation should be made and include in gross wages before the final pay date of the year. Annually we send out notices to our business owners to help and aid with this calculation.

For detailed discussion on rules for reporting personal use of company owned and operated vehicles, see IRS Publication 15-B, Employer’s Tax Guide to Fringe Benefits.

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