During tax season, it’s important to have an organized record of any expenses associated with business driving. Whether you are a business or an individual, if you used a vehicle for work-related reasons, associated expenses incurred during these trips may be deductible. Auto expenses might have a significant impact on your taxes, and David Gallagher CPA is available if you need help with them.
Read this overview to familiarize yourself with the basics of auto expense deductions.
For individuals, expenses may be deductible on certain payments you make while you’re operating a personal vehicle for business or medical purposes. An example might be if you had to drive somewhere to meet with a client. If you have to move residences as part of a position change, expenses you pay may also be deductible.
If you must get medical care, payments you make while driving to the hospital may also be deductible. Driving for personal, non-medical reasons or driving as part of an individual’s commute to and from home is not considered a deductible expense.
If you want to take deductions on auto expenses, you must keep accurate records. The IRS mandates that taxpayers keep substantiation for their mileage deductions.
Keep a log to track how many miles you’ve driven on business-related trips. In addition, you should write down any payments you’ve made during those trips. You should also write down the original cost of the vehicle, along with the date you took ownership of it.
There are two main ways to deduct business-related auto expenses: standard mileage deduction and actual expense deductions. Your financial situation will determine which method will net you the bigger deduction.