Standard Mileage Rate
- The federal government predetermines the personal car expenses you can deduct for each mile you drive for business purposes. In 2009, the maximum allowable deduction was 55 cents per mile. To use the standard mileage rate methodology to calculate the deduction, you must elect it in the first year you use a personal vehicle for business purposes. Taxpayers cannot revoke the standard mileage rate method once they use it on a tax return. However, you can choose a different method in subsequent tax years. Election of the standard mileage rate precludes you from deducting other related expenses such as gas and oil.
Actual Car Expense
- If you choose not to use the standard mileage rate method, you can deduct the actual costs for the business use of your automobile. Common expenses include gas, oil, tolls, depreciation, garage rent, parking fees, registration fees, tires and repairs. If you use the vehicle only partially for business and employment purposes, you must make an allocation to calculate the nondeductible personal-use portion. Make the allocation by multiplying the ratio of business miles you drive in a year to total miles by all car expenses.
- You cannot deduct car expenses for commuting to and from work. However, if you have a second job, the commute from one workplace to another is an eligible deduction. Additionally, if an employer requires that you use a personal vehicle to drive to a client after arriving at the workplace, you can deduct the personal expense you incur.
Temporary Work Location
- Taxpayers can deduct the cost of driving between home and a temporary work location if it is outside of the area where you normally live and work, and you have a permanent workplace that you return to after the temporary assignment. The IRS deems work assignments as temporary if you do not expect the assignment to last for more than one year. An assignment does not qualify as temporary if initially you expect it to last longer than one year, but actually terminates earlier.
- If you normally work out of a personal residence, car expenses are deductible for traveling from home to another workplace. However, the workplace you drive to must relate to work you normally perform in the home. Driving from a home office to a second job is not eligible for a deduction.
- Taxpayers must include all car expenses as miscellaneous deductions on the Schedule A attachment to IRS Form 1040. The total annual miscellaneous deductions are eligible to the extent they exceed 2 percent of adjusted gross income.