Common Business Car Expenses
Buying or leasing a car is a costly expense on your budget. As a common business expense, the deductibles are important. According to the IRS, beginning on Jan. 1, 2011, you may deduct $0.51 per business miles driven as the standard mileage rate deductible for the use of a car, van, pickup or panel truck. Driving a car for most businesses is a necessary expense.
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Actual Expense
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If you use your car only for your business you may deduct the actual expenses of the vehicle, which commonly are gas, oil, repairs, tires, insurance, registration fees, licenses and depreciation or lease payments. However, if you use the car for both business and personal purposes, you may deduct only the cost of its business use. Keep in mind that for the first year of leasing or owning a car for your business you are required to use the standard mileage rate as your method of deduction. After the first year of using the car for your business you can choose between the standard mileage rate method or actual expense method.
Calculating Mileage
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Be sure to log the date, location, reason for the drive and total mileage to get the maximum deductions for your car expenses of your business. As an example of your calculation, if you are using the car for both business and personal use, if you drove a total of 10,000 miles for the year -- and 5,000 of those miles were for business -- your business use is 50 percent, which is 5,000 divided by 10,000. If your total vehicle expenses were $2,500 then dividing $2,500 by 0.5 gives you a deduction of $1,250, as of 2011.
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Interest, Parking and Tolls
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Other common car expenses are interest, parking fees and tolls, which are deducted as separate items whether you use actual expenses or standard mileage. Interest paid on a vehicle loan must be pro-rated if you also use the vehicle for personal use.
Insurance
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Auto insurance for business use is a common business expense that covers any driver associated with the business. Your rate will be based on the nature of your business and the mileage you will accumulate. You may be able to negotiate a cheaper rate if you can prove that you drive limited distances, as well as installing security devices that are approved by the insurer. Insurers also consider parking your car in a secure location like a locked garage overnight to reduce your rate.
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