Things You'll Need:
- Mileage log for vehicle
- Receipts for auto-related expenses
-
Step 1
Keep a record of how much you use your car for business purposes throughout the year. You do not have to provide documentation of your business use with your taxes, but you may have to produce supporting evidence of your claim if you are ever audited. A mileage log that tracks where you went, what business purpose that trip met and how many miles it was from destination to destination will suffice.
-
Step 2
File receipts for gas, auto repairs, parking and any other car-related expenses. These receipts will be necessary to prove your claims if you are audited.
-
Step 3
Calculate your deduction using the Standard Mileage Rate method. Add up the miles you have driven over the year and multiply them by the standard mileage rate for the year you file your taxes. This rate varies each year and can be found in Publication 463 from the IRS (see Resources below).
-
Step 4
Calculate your deduction based on the Actual Expenses method. This method allows you to take into account all of the costs of owning and operating a car including gas, insurance, repairs, maintenance, garage rent, parking fees, tolls, car payments and depreciation. Add up all of these expenses and divide the sum by the percentage of time you use your car for business purposes, as opposed to personal purposes, in order to derive your deduction.
-
Step 5
Compare how much you can deduct with each method, and choose the one that gives you the higher deduction. Being able to deduct more will result in having to pay less in taxes.
-
Step 6
Research any situational exceptions and select the appropriate forms to file your taxes using Topic 510 "Business Use of a Car" provided by the IRS.
