Deducting the purchase of a car may be possible depending on its use and the nature of the purchase. Unless a company owns the car and its sole use is for business, it may not be possible to deduct the entire price of the car but only a portion. Most states only allow the sales tax to be deducted if the car is for personal use.
Define the purpose of the car. Is the car for personal use, business use or mixed use? Commuting from home to the office does not count as business use, but driving from the office to a client's office does. If a car is used primarily for business purposes, the following may also be deducted: parking expenses (paying for parking at client's office), interest on the loan (only if the owner is self-employed), registration fees, lease expense, insurance, fuel, repairs and depreciation. Record all of these expenses and save receipts to verify costs.
Record mileage. Drivers are able to claim 55 cents per mile for every mile driven for business purposes. However, if the driver claims the standard mileage rate (55 cents) they are not able to claim the expenses listed in section 1. The driver must choose which way to claim their auto expenses.
For example, if the driver must drive from her office 30 miles to the office of a client, she could claim $16.50 in deductions (30 x .55). If. however, from the client's office, she drives home, she would only be able to claim the distance from the client's office to her office and not the full commute. Recording mileage is important in case the driver is ever audited.
Deduct medical, moving or charitable driving. If the vehicle is used for driving either people in your home or yourself to the hospital or doctor, the expense may be deducted at 24 cents per mile. If the vehicle is used for moving, the expense may be deducted at 24 cents per mile. If the vehicle is used in conjunction with performing charity work, such as delivering meals to the elderly with a church group, then those expenses can be deducted at 14 cents per mile.
- Photo Credit Headlight on new car image by steven Husk from Fotolia.com
- How to Record Vehicles Purchased on Credit in Accounting
How to Check on an MVR
An MVR, which stands for Motor Vehicle Record, is a record of your driving history in the state that you are licensed...
If I Use My Car for Work Can I Deduct Expenses?
The Internal Revenue Service allows you to deduct expenses if you use your car for work, but you’ll need to separate business...
- How Do I Buy a Car Under My Corporation?