Do Car Repairs Count as a Business Deduction?

Keep records of automobile repairs to support a tax deduction.

Business people, self-employed individuals or independent contractors who drive a vehicle in daily operations quickly realize how expensive it is. There are more expenses incurred beyond the cost of fuel when driving a car during the normal course of business. A common expense is maintenance and repair, which can be very costly. The IRS allows for automobile repairs, but certain rules apply.

Repairs Related to Business Use Only

You can deduct all manner of car expenses, including repairs and maintenance, in connection with an automobile used for business purposes. This includes, but is not limited to, tires, oil changes, body repair if the car has been in an accident, air conditioning service, repair of your GPS and even detailing if your car must be presentable for your clients or business. The IRS requires that auto expenses be limited to use in business matters only, regardless if the vehicle is leased or owned. The vehicle may be a car, an SUV or a pickup truck that is used for business, but not a taxi cab, limousine, airport transport van or any other for-hire vehicle that transports passengers. Vehicles used as equipment, for instance dump trucks, are also not eligible.

Combined Use of Auto

If you use your automobile for both business and personal needs, the IRS prohibits the deduction for the personal portion of use. This includes the use of the auto for regular commuting miles driven to and from a regular place of employment. Specific records must be kept that pertain to and document the business use of the vehicle. The deductions for repairs must be prorated based on the percentage of the business miles driven during the year.

Standard Mileage Rate vs. Actual Expenses

The taxpayer should determine the greatest deduction by using either the standard mileage rate, which is .50 per mile in tax year 2010, or by itemizing actual repair expenses, for which receipts are needed to document the expense. Taxpayers who use the cents-per-mile option are not required to keep receipts of their actual expenses. The standard mileage rate is not available if the vehicle has used the straight line depreciation method or if more than one vehicle is used by the business owner. Check the IRS website to ensure the correct mileage rate for any given year.

Vehicle Owned By an Employee

An employee who uses a personal auto in connection with business should request reimbursement from the company. If the company reimburses the employee, it will normally be paid at the standard mileage rate for that tax year. The company gets the deduction for vehicle repairs, and the payment to the employee is not reported as taxable income. If the employees is not reimbursed, the employee can claim the business expense deduction on Schedule A, Form 1040.

References

• "Tax Power for the Self-Employed"; James O. Parker; 2005
• IRS: Deducting Business Expenses
• Turbo Tax: Business Use of Vehicles
• IRS: Topic 510 - Business Use of Car